CESTAT Hyderabad: Cenvat Credit Admissible for Services Rendered Before 01.04.2011 Even if Invoicing and Payment Occurred Later
Background and Overview
The CESTAT Hyderabad, in the matter of KCP Ltd. Vs Commissioner of Central Tax Guntur, has delivered a significant ruling affirming that Cenvat Credit on input services used for establishing a manufacturing facility cannot be denied solely on the basis that invoices were raised and payments were made after 01.04.2011, provided that the underlying services were actually rendered prior to that date. The order, pronounced in open court on 09.04.2026, sets aside the demand, interest, and penalty confirmed by the adjudicating authority and grants consequential relief to the appellant.
This decision carries considerable weight for manufacturers who commissioned large-scale construction and erection projects around the time of the critical statutory amendment that took effect on 01.04.2011, and who faced similar demands on account of billing cycles extending beyond that date.
Facts of the Case
KCP Ltd. (the appellant) is engaged in the manufacture of OP Cement and Clinker classified under Central Excise Tariff heading Nos. 25232910 and 25231000 respectively. The appellant undertook the establishment of a new cement production facility at Muktyala (V), Jaggaiahpet (M), Krishna District, Andhra Pradesh.
For executing this greenfield project, the appellant awarded contracts to M/s L&T Ltd. covering the following scope of work:
- Civil construction works
- Detailed mechanical engineering
- Structural and mechanical fabrication
- Erection and commissioning works
Key factual milestones:
- Construction of the factory was fully completed and commercial production commenced in March 2011
- M/s L&T Ltd. raised certain invoices after 31.03.2011 due to the time required for reconciliation of materials and accounts, even though the underlying work had been physically completed before that date
- The appellant availed Cenvat Credit of Rs. 56,40,148/- during the period April 2011 to February 2012 on the basis of invoices received during that period, in accordance with
Rule 4(7)of the Cenvat Credit Rules, 2004
The Demand and Adjudicating Authority's Position
The Commissioner of Customs, Central Excise and Service Tax, Guntur, through Order-in-Original No. 77/2012-C.Ex dated 30.08.2012, denied the entire Cenvat Credit of Rs. 56,40,148/- and confirmed demand along with interest and penalty. The adjudicating authority's findings rested on two principal grounds:
Ground 1: Lack of Documentary Evidence for Pre-01.04.2011 Completion
The adjudicating authority held that the mere fact of trial production or commencement of commercial production in March 2011 was not conclusive proof that all contracted works under the works contract had been completed before 01.04.2011. It was noted that commissioning of trial production of clinker does not necessarily presuppose that the entirety of civil, mechanical, and erection works had been concluded.
Ground 2: Statutory Exclusion via Notification No. 3/2011-CE(NT)
With effect from 01.04.2011, Notification No. 3/2011-CE(NT) dated 01.03.2011 amended the definition of "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004 to exclude services falling under Section 65(105)(zzzza) of the Finance Act, which pertains to works contract services. Since the invoices were received and credit was availed post 01.04.2011, the authority concluded that the credit was inadmissible.