2010 (8) TMI 517 - AT - Service Tax

Cenvat credit of service tax - Input service - Disallowance of credit of service tax paid on services utilized in connection with construction of staff quarters on the ground that such services cannot be considered as input services in relation to the services provided by the appellants - In the earlier cases of the same assessee, Coordinate Benches held in their favour - According to the ld. Counsel, the Hon ble High Court s decision in Coca Cola case should be followed as binding precedent in this case - Find that the Hon ble Supreme Court s ruling in Maruti Suzuki case is to the contra and the same is constitutionally binding on this Tribunal - There are clearly two differing decisions of the Coordinate Benches on the same issue - It appropriate to place the matter before Hon ble President for considering reference to Division Bench.

Summary

Issues:
Appeal against disallowance of Cenvat credit on service tax paid for construction of staff quarters.

Analysis:
The case involved an appeal against the order of the Commissioner (Appeals) upholding the disallowance of Cenvat credit on service tax paid for services used in the construction of staff quarters. The appellants, providers of 'Banking and other Financial Services,' availed Cenvat credit on capital goods and input services under the Cenvat Credit Rules, 2004. The original authority disallowed the credit, ordered recovery of Rs. 2,02,876/- with interest, and imposed penalties. The Commissioner (Appeals) upheld the original authority's decision.

The appellant's consultant argued that the definition of 'input services' allows credit for services used in the premises of the service provider, regardless of whether it is the premises where services are provided. The consultant cited a previous Tribunal decision where Cenvat credit for services used in the construction of executive staff quarters was allowed. In contrast, the Departmental Representative contended that the term 'premises' should have a connection to the activities of providing services and relied on a Tribunal decision disallowing credit for services in a residential colony. Additionally, the Departmental Representative cited a Supreme Court decision regarding credit on inputs used for electricity generation in a residential colony.

The Tribunal analyzed the definitions of 'inputs' and 'input services,' emphasizing that the term 'premises' should not be interpreted to include every premise owned by the service provider. The Tribunal concluded that services used should have a nexus to the services provided by the party, and ownership of premises alone does not make the services eligible for credit. The Tribunal agreed with a previous decision disallowing credit for services in a residential colony.

However, the Tribunal noted conflicting decisions by Coordinate Benches on similar issues and decided to refer the matter to a Division Bench for clarification on whether services used in the construction of staff quarters can be considered input services eligible for Cenvat credit. The Registrar was directed to present the matter to the Hon'ble President for consideration of the reference to a Division Bench.