2012 (7) TMI 316 - AT - Service Tax

Denial of CENVAT Credit - demand of service tax under the category of renting of immovable property after the mall was opened was discharged by utilizing the CENVAT credit in respect of tours and travel agent services, security service, air ticket booking services, etc - Held that - Credit of duty paid on inputs is available when the inputs are used for providing an output service . In the case of input service , the definition includes input services used by a provider of taxable service for providing an output service. Therefore the definition of input and input service are pari materia as far as the service providers are concerned. As decided in CCE, VISAKHAPATNAM-II Versus SAI SAHMITA STORAGES (P) LTD. 2011 (2) TMI 400 HC) that that without use of cement and TMT bars for construction of warehouse assessee could not have provided storage and warehousing service . In the present case also, without utilizing the service like tours and travel agent services, security service, air ticket booking services,etc. mall could, not have been constructed and therefore the renting of immovable property would not have been possible - in favour of assessee.

Summary

Issues:
- Eligibility of CENVAT credit for input services during the construction of a commercial mall.
- Interpretation of the definition of 'input services' under Rule 2(1)(i) of CENVAT Credit Rules, 2004.
- Applicability of previous tribunal and high court decisions on similar issues.
- Relevance of Circular No.98/1/2008-S.T. in determining credit admissibility.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Ahmedabad dealt with the eligibility of CENVAT credit for input services utilized during the construction of a commercial mall. The appellant, engaged in constructing malls and renting spaces, availed various services during mall construction and claimed CENVAT credit. However, a subsequent service tax liability arose, leading to a denial of credit by the Revenue on the grounds of ineligibility for certain services, including 'construction of commercial complex service'.

The appellant argued that the input services were essential for constructing the mall, which was crucial for providing output services like renting and leasing spaces. They relied on previous tribunal and high court decisions, such as the case of Sai Sahmita Storages (P) Ltd., to support their claim that services utilized during construction should be considered as input services. Additionally, they cited the case of Lakshmi Vilas Bank Ltd. to strengthen their position.

The Revenue, however, referred to Circular No.98/1/2008-S.T. to assert that certain services, like 'commercial or industrial construction service', might not qualify as input services for immovable property. They highlighted the definition of 'input services' under Rule 2(1)(i) of CENVAT Credit Rules, emphasizing that services must be used for providing an output service to be eligible for credit.

After considering the arguments, the Tribunal analyzed the services availed during construction and the subsequent operation of the mall. They concluded that without utilizing the input services, the mall construction and subsequent renting of immovable property would not have been feasible. Drawing parallels with the decision of the Hon'ble High Court of Andhra Pradesh on a similar issue, the Tribunal ruled in favor of the appellant, allowing the appeal and providing consequential relief.

In essence, the judgment clarified the interpretation of 'input services' in the context of construction activities for immovable property, emphasizing the necessity of utilizing services for providing output services to claim CENVAT credit. The decision underscored the importance of previous legal precedents and relevant definitions in determining credit admissibility for construction-related services.