Is renvoation in terms of construction is eligible cenvat

This query is : Resolved

vishnu (Querist)
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18 November 2012 Dear Expert

We dismantled the one of the old column (made of steel) of our factory shed and replaced the same with new column, the service provider has charged service tax for the above service.whether we are eligible to take credit of the same under renovation of factory shed.

The Central Excise official says this service is not eligible for cenvat as renovation as it is a part of the construction activity which is excluded from input service defination.

kindly clarify

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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18 November 2012 Service tax of 'works contract' on account of "construction of a building or a civil structure or a part thereof" is excluded from the definition of 'input service' w.e.f 01/04/2011 meaning thereby ,the findings of the department officials seems to be correct.

vishnu

vishnu (Querist)
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19 November 2012 Dear Sir
as per my opinion, the inclusive list speaks about renvoation in broad way. Why cannot we take credit

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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01 August 2024 The eligibility of CENVAT credit on renovation or construction activities can be complex and depends on specific interpretations of the rules and definitions under the CENVAT Credit Rules, 2004. Here's an analysis based on the information provided and general principles:

### Relevant Provisions

1. **Definition of Input Service:**
- According to the CENVAT Credit Rules, "input service" means any service:
- Used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal.
- And includes services used in relation to setting up, modernization, renovation, or repairs of a factory or an office relating to such factory.

2. **Exclusion from Input Service:**
- Certain services are specifically excluded from the definition of "input service." This includes services related to construction of a building or a civil structure or a part thereof or laying of foundation or making of structures for support of capital goods, except for the provision of service portion in the execution of a works contract.

### Interpretation of Renovation

- **Inclusive List:**
- The inclusive list in the definition of input service does mention "renovation." However, it is essential to determine whether the specific activity falls under renovation or construction.

- **Dismantling and Replacement:**
- The activity described involves dismantling an old column and replacing it with a new one. If this activity is seen as part of regular renovation or repair, it might be eligible for CENVAT credit.
- However, if the Central Excise official views this as a construction activity, it could be excluded from the definition of input service.

### Specific Clarification Needed

- **Nature of Work:**
- It is crucial to clarify whether the dismantling and replacement activity is considered part of the factory's renovation or a new construction activity. This distinction will determine the eligibility for CENVAT credit.

### Case Law and Precedents

- **Judicial Interpretations:**
- There have been various judicial interpretations on similar matters. Some cases have allowed CENVAT credit for renovation and repairs, while others have denied it for construction activities.

### Practical Steps

1. **Documentation:**
- Ensure that all documentation clearly indicates the nature of the work as renovation or repair rather than new construction.

2. **Consultation:**
- Seek advice from a tax professional or legal expert specializing in indirect taxes to review the specific details and documents related to the service.

3. **Representation:**
- If there is a strong basis for treating the activity as renovation, consider representing the case to the Central Excise authorities with detailed justification, possibly citing relevant case laws or precedents.

### Conclusion

The eligibility for CENVAT credit on the service tax paid for dismantling and replacing a column in the factory shed depends on whether the activity is classified as renovation or construction. Given the Central Excise official's interpretation, it would be prudent to seek detailed professional advice and possibly represent the case with supporting documentation and precedents to clarify the nature of the work as renovation.