1. The appellant is engaged in the manufacture of excisable goods namely cold rolled sheets/galvanized sheet, colour coated sheets of iron and steel falling under chapter 72 of Central Excise Tariff Act, 1985. The dispute in the present appeal relates to availment of Cenvat credit of Service Tax paid on the consulting engineering services received by the appellant in relation to structural design and drawing of cellar foundation of 6 HI Mill Project. The said credit stands availed by the appellant during the period April, 2013 to March, 2014 i.e. after the amendment to the definition of input service w.e.f. 01.04.2011 vide which certain services were excluded from the definition. The lower authorities have denied the credit by observing that the services of consulting engineers, which are used by the appellant for construction activities stand excluded from the definition of input services as provided under Rule 2(l) of Cenvat Credit Rules. On the other hand, the appellant's contention is that the said services are not the construction services which have been specifically excluded from the definition, but the same are consulting engineering services which are covered by the main definition clause of Rule 2(l). Appreciating the contentions of both the sides, the provisions of Rule 2(l) of Cenvat Credit Rules, 2004 are required to be appreciated and the same are being reproduced below, as they stood during the relevant period for the purposes of the present appeal:--
'(I) "Input service" means any service,--
(i) used by a provider of [output service] for providing an output service; or
(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal,
and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market, research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal;
(A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) insofar as they are used for--
(a) construction of execution of works contract of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods, Except for the provision of one or more of the specified services or;
.. .. ..
As is seen from above, the services used in relation to modernization, renovation or repairs of a factory continue to be cover by the definition of inputs services, but works contract and construction services stand excluded from the said definition including the services listed under clause B of Section 66E insofar as the same are used for construction or execution of works contract of a building or a civil structure. The appellant's contention is that such exclusion relates to only works contract or construction services and inasmuch as consulting engineer services are neither works contract services, nor construction services, the same cannot be held to be excluded services.
Merely because these services in question stand used by them in or in relation to the execution of the excluded services, the same would not become excluded services themselves.
2. I find that the expression used in the exclusion clause is those services, insofar as they are used for, construction or execution of works contract of a building or a civil structure. As expression used is "insofar as they are used for" the said exclusion clause read with section 66E makes it very clear that the exclusion does not stand restricted only to works contract service or construction services, but the same relates to the services which are used for execution of a civil construction. The language used in the said exclusion clause clearly indicates that any service used for execution of works contract or construction services would also get ousted from the definition of input service. Admittedly the consulting engineer services stand used by the appellant for the purpose of execution of the construction of structural design and drawing of cellar foundation of 6 HI Mill project. As the exclusion is not only in respect of the actual services mentioned in the exclusion clause, but also refers to the services used for execution of such construction, I am of the view that the lower authorities have rightly denied the credit of the Service Tax paid on the consulting engineer services.
It may be clarified here that inasmuch as the exclusion is only in respect of works contract or construction services and the renovation or repair or modernization of factory continues to be covered by the main definition of input services and if such consulting engineer services are used for said purposes of repair or renovation they would not get excluded, inasmuch as the exclusion would only be limited to such services used for the works contract or construction services. In the present case it is not the appellant's case that such consulting engineers services were used for renovation or repairs, but admittedly used for construction purposes, I find no inf
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irmity in the views of the lower authorities. It is accordingly held that the denial of credit to the appellant is justified and is in accordance with law. However, as regards penalty, I agree with the ld. Advocate that inasmuch as the issue is a bona fide dispute of legal interpretation of the newly introduced provisions, and inasmuch as the credit was availed by reflecting the same in the Cenvat accounts, no mala fide can be attributed to the assessee so as to call for imposition of any penalty. Accordingly, while upholding the demand along with interest, the penalty is set aside. Appeal is disposed of in the above terms.