By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
fiogf49gjkf0d
CENVAT credit of input services received for
laying of pipes for transport of gas would be available when such
services are not for laying of foundation or making of structures for
support of capital goods, but for laying of pipeline for transport of
gas and hence are eligible input services.
Facts
Output
services provided by applicant are in the nature of transport of gas
through pipelines. For the same, applicant would be required to lay
pipelines under earth for which applicant proposes to engage
contractors. Applicant proposes to grant turnkey contracts to
contractors for supply of pipes as well as installation and
commissioning. The composite price in respect of such contracts would be
made of two components, i.e. price for supply of goods and that for
supply of services and separate invoices would be raised accordingly.
Further, it is mentioned that these contractors would be liable for
service tax as “works contract services” as defined u/s. 65B (54) of the
Finance Act, 1994 and would discharge service tax liability as per Rule
2A of Service Tax (Determination of Value) Rules, 2006. Apart from
construction services, applicant would also obtain other services like
third party inspection and testing, consulting engineering, etc. which
would be required to bring into existence a pipeline. The advance ruling
was sought for ascertaining eligibility for CENVAT credit of service
tax paid to contractors and other service providers.
Revenue
contended that services used for erection and commissioning of such
plant do not take part directly on providing output taxable service of
transportation of gas and also the same cannot be considered to be
integrally connected in providing output service in view of restrictive
definition of “input service”. In other words, exclusion clause (A)(b)
of definition of input service given under Rule 2(l) of CCR, 2004 would
be applicable in this case, CENVAT credit should not be allowed.
Held:
AAR
held that pipeline is used for output service of transport of goods
through pipe and “input service” means any service used by provider of
output service for providing an output service. As regards exclusion
clause, AAR observed that exclusion clause is for service portion in
execution of works contract and construction services, however,
considering erstwhile section 65(25b) of the Finance Act, service of
laying of pipeline is different from construction of building or civil
structure and therefore would not come in Rule part (a) of Rule 2(l)(A).
For the purposes of analysing applicability of part (b), AAR took note
of detailed process followed in laying pipelines and accordingly held
that input services availed by applicant are not for support of pipes or
valves but for laying of pipeline for transport of gas and therefore
such services would also not fall within part (b) of exclusion clause.
AAR thus held that applicant shall be entitled to CENVAT credit of
service tax that would be paid to EPC contractor/other construction
contractors and other service providers against the applicant’s output
service tax liability under the taxable output service in the nature of
transport of gas through pipelines.
