2023 (2) TMI 1255 - AT - Service Tax

CENVAT Credit - Service Tax paid on service charges of toilets located in port user building and residential building is admissible or not? - HELD THAT - The territorial location cannot decide the admissibility of CENVAT Credit under the provisions of Rule 2(l) of CENVAT Credit Rules 2004. Issue is covered by the definition of input service as defined under Rule 2(l) of CENVAT Credit Rules 2004. The general understanding emerges from the reading of the said rule is that the input service should be used for providing output service to be eligible for CENVAT Credit. The Revenue has not established that the services used in port user building are not used for providing output service. Therefore the CENVAT Credit of Service Tax paid on services of toilets located in port user building is admissible to the appellants. The appeals are partially allowed. The appeals related to CENVAT Credit regarding residential area stand withdrawn.

Summary

Issues:
Admissibility of CENVAT Credit on Service Tax paid for maintenance of toilets in port user building and residential building.

Analysis:
The appeals involved a dispute regarding the admissibility of CENVAT Credit on Service Tax paid for servicing toilets in a port user building and a residential building. The appellants, providing port services and toilet facilities, claimed the credit for Service Tax paid on toilet maintenance for discharging Service Tax on port services. The contention revolved around whether the Service Tax paid on toilets in the port user and residential buildings was admissible. The adjudicating authority had denied the appellants the credit, stating the port user building was outside the port area. However, the appellants argued that the location of the port user area was irrelevant, emphasizing that the key factor was whether the building was used for business activity to provide output services.

The Learned AR relied on the Order-in-Original, highlighting that the port user building was considered beyond the territorial location of the port, leading to the denial of credit by the appellate authority. However, the Member (T) analyzed the situation, emphasizing that the admissibility of CENVAT Credit should not be determined solely based on territorial location but should align with the definition of input service under Rule 2(l) of CENVAT Credit Rules, 2004. The Member (T) noted that for CENVAT Credit eligibility, the input service should be used to provide output service. Since the Revenue failed to establish that the services in the port user building did not contribute to providing output service, the Member (T) held that the CENVAT Credit for Service Tax paid on toilet services in the port user building was indeed admissible.

Consequently, both appeals were partially allowed, with the CENVAT Credit related to the residential area being withdrawn. The judgment clarified the importance of the actual use of services in providing output service for determining the admissibility of CENVAT Credit, rather than solely focusing on the territorial location of the building.