Credit Can’t Be Denied Repair And Maintenance Services Of Plant And Machinery By Categorising As Work Contract: CESTAT

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has held that credit on services used for repair and maintenance of plant and machinery cannot be denied merely because they were categorized as works contract or construction-related services. The bench of Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) has observed that department's appeal challenging the grant of CENVAT credit worth ₹67.50 lakh, ruling that procedural deficiencies in invoices cannot override substantive entitlement to credit. The matter arose from an Order-in-Original passed on March 29, 2023, by the Principal Commissioner, CGST and Central Excise, Ujjain. The adjudicating authority had confirmed a demand of ₹20.49 lakh out of a larger show cause notice involving alleged wrongful availment of CENVAT credit of ₹2.49 crore, while dropping demands aggregating to ₹1.95 crore. The company challenged the portion of the order disallowing credit, whereas the department appealed against the relief granted by the Commissioner. Jayaswal Neco Industries Ltd., a manufacturer of sponge iron, pig iron and billets falling under Chapter 72 of the Central Excise Tariff Act, had availed CENVAT credit on various input services during the relevant period. The dispute emerged following departmental audits and a special audit covering the period from April 2011 to January 2014, which resulted in allegations that certain credits had been availed on ineligible services, services not received at the factory premises, and on the basis of allegedly defective documents. The Tribunal examined three categories of services on which credit aggregating to ₹20.49 lakh had been denied. The first related to marine cargo insurance services involving credit of ₹9.50 lakh. The Bench found that the Commissioner had committed a factual error by treating credit pertaining to survey services as marine cargo insurance services. The records showed that the company had furnished detailed break-ups and supporting documents explaining the admissibility of the insurance-related credits. The Tribunal held that the Commissioner had proceeded on an incorrect understanding of the figures and that the company was entitled to the entire credit of ₹9.50 lakh. The second issue concerned credit of ₹10.72 lakh availed on works contract services used for repair and maintenance of existing plant and machinery. The Commissioner had denied the credit by invoking the exclusion clause under Rule 2(l) of the CENVAT Credit Rules, 2004. However, the Tribunal observed that the exclusion applies only to works contract services used for construction of buildings, civil structures or foundations for capital goods. Since the services in question related to repair, maintenance, painting and fabrication of plant and machinery already installed in the factory, they could not be equated with civil construction activities. Consequently, the denial of credit was held to be unsustainable. The third component involved credit of ₹26,880 availed on manpower supply services received during a factory shutdown for maintenance activities. The Commissioner had treated the services as civil construction services and denied the credit. The Tribunal, after examining the invoices, found that the services were actually manpower supply services used for repair and maintenance of plant and machinery, which were directly connected with manufacturing operations. Such services qualified as input services under Rule 2(l) of the CENVAT Credit Rules, making the credit admissible. Having concluded that all three categories of disputed services qualified for credit, the Tribunal held that the company was entitled to the entire amount of ₹20.49 lakh. In view of this finding, the Bench found it unnecessary to examine the company's challenge regarding invocation of the extended limitation period. The Tribunal then turned to the department's appeal challenging the grant of CENVAT credit amounting to ₹67.50 lakh. The Revenue argued that the invoices issued by manpower supply service providers Anand Infracon and J.K. Construction did not adequately describe the services rendered and therefore failed to satisfy the documentary requirements prescribed under Rule 9(2) of the CENVAT Credit Rules. Rejecting the department's contention, the Tribunal noted that there was no dispute regarding the actual receipt of the manpower supply services, their utilization in manufacturing operations, or payment of service tax by the service providers. The Bench observed that all substantive conditions for availment of credit stood satisfied. It emphasized that procedural defects or minor deficiencies in invoices cannot be used to deny otherwise legitimate CENVAT credit. Relying on earlier judicial precedents, the Tribunal reiterated that credit cannot be denied solely because of technical lapses in documentation when the receipt and use of taxable services are established. Accordingly, CESTAT set aside the portion of the Commissioner's order disallowing credit and allowed the appeal filed by Jayaswal Neco Industries Ltd. At the same time, it dismissed the Revenue's appeal and upheld the grant of ₹67.50 lakh CENVAT credit. The ruling reinforces the principle that substantive compliance and actual use of input services in manufacturing activities take precedence over procedural irregularities in documentation while determining eligibility for CENVAT credit. Case Details Case Title: Jayaswal NECO Industries Limited Versus Principal Commissioner, CGST Citation: JURISHOUR-1508-CES-2026(DEL) Case No.: Excise Appeal No. 55196 of 2023 Date: 02.06.2026 Counsel For Appellant: Bhagwat Dayal, Authorised Representative Counsel For Respondent: Sukriti Das and Shivam Bansal, Advocates Click Here To Read Order Read More: Mere Uploading Of GST Order On Portal Is Not “Valid” Service: Tripura HC

Credit Can’t Be Denied Repair And Maintenance Services Of Plant And Machinery By Categorising As Work Contract: CESTAT

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