By TIOL News Service

MUMBAI, JUNE 16, 2017: THE appellant is engaged in the manufacture of Aluminium doors and windows. Theyare also registered as service provider for construction services. The appellant availed CENVATcredit on the inputs used in the manufacture of Aluminium doors and windows which were cleared on payment of duty to the construction site.

As regards payment of service tax on the Construction Services, the appellant claimed abatement notification no. 1/2006-ST and accordingly discharged service tax on the abated value.

The case of the department is that since appellant availed exemption notification no. 1/2006-ST they are not entitled for the CENVATcredit on the inputs used in the manufacture of Aluminium doors and windows .

The matter is before the CESTAT.

It is submitted that appellant is carrying out two distinct activities, one of manufacture of Aluminium doors and windows and other is construction services at site; that since doors and windows were cleared on payment of duty,CENVATcredit availed on inputs is correct and legal and which cannot be disputed. As regards construction service, since it has no relation with the manufacturing activity of the appellant, therefore,availment of CENVAT credit on the inputs used for manufacture of doors and windows cannot be disputed.

The AR justified the stand taken by the department.

The Bench observed –

"4. …, I find that revenue has proposed to deny the CENVAT credit in respect of inputs used in the manufacture of doors and windows, which were cleared on payment of duty on the ground that appellant in respect of construction of services claimed the exemption notification no.1/2006-ST. As per the facts, the appellant are carrying out two different activities one is manufacture and other is construction services, both have to be dealt with separately for all the purposes. As regard the manufacture activity, appellant has complied with all the rules and regulation procedure such as input was received on which credit was taken, the said input was used in the manufacture of doors and windows and it is cleared on the payment of duty. This fact is not under dispute. Accordingly, Cenvat credit availed on such inputs is clearly admissible. Even though if there is violation in respect of construction service the Cenvat credit which relates to manufacturing activity cannot be disputed. Therefore the adjudicating authority as well as Commissioner (Appeals) has denied the Cenvat Credit without application of mind. Hence impugned order is not sustainable and the same is set aside…."

The Appeal was allowed with consequential relief.

(See 2017-TIOL-2039-CESTAT-MUM)