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Issues involved: Construction services, Cenvat credit, Service tax, Nexus between services and output services, Prima facie case, Waiver of pre-deposit, Registration as a pre-requisite for availing credit.
In the judgment by Appellate Tribunal CESTAT BANGALORE, the appellant, involved in constructing a 5-Star hotel, availed Cenvat credit of service tax paid on construction services and other services received during the construction period. The dispute arose as the hotel had not yet started functioning, leading to the denial of Cenvat credit based on the grounds that credit cannot be taken before commencing the activity and that the services received lacked nexus with the output services. Additionally, interest and penalty equal to service tax were imposed, with the total amount involved being &8377; 7,78,43,150/-. Upon hearing both sides, the Tribunal found that the appellant had established a prima facie case in their favor. The services received were utilized for the construction of the hotel, from which various output services such as mandap keeper service, outdoor catering service, health services, and short-term accommodation service were to be provided. The definition of 'input service' includes services used in relation to setting up, modernization, renovation, or repairs of premises where output services are provided. It was noted that the services used in constructing the hotel could be considered as used for setting up the premises for providing output services, indicating a nexus between the services received and the future output services. Another ground raised was that the credit was availed before obtaining registration. However, previous decisions have held that registration is not a pre-requisite for claiming the credit of service tax paid on input services. Considering these circumstances, the Tribunal concluded that the appellant had successfully made a prima facie case for complete waiver. As a result, there was a waiver of pre-deposit and a stay against the recovery of dues during the appeal process. The order was pronounced and dictated in open court.
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