2016 (5) TMI 13 - AT - Service Tax

Admissibility of Cenvat credit for the period April 2011 February 2012- Service tax paid on construction services - Department contended that as the services have been used for construction of building which is neither for finished goods nor output services but the output being property the credit is not admissible. Also from 01.04.2011 the service of construction of a building for civil structure or part thereof has been specifically excluded from the definition of input service but appellant submitted that these services were availed by the appellant and building/construction was completed and handed over before 01/04/2011. Held that - appellant submitted certain documents like letter dated 28/01/2011 issued by M/s Sunshine Constructions copy of the ledger account memo for the sanction of Electricity load extension to the newly constructed building and copies of drafts for payment made by appellant towards Building and Other Construction Workers Welfare Cess which establish that the provision of availing the construction service had been completed before 01/04/2011 but that invoice was raised only on 26/04/2011. When the provision of construction service has been completed prior to 01/04/2011 denial of credit only because of the delay in issuing the invoice is not justified as the Board has clarified that credit is available if the provision of the service was completed before 01/04/2011. Therefore the credit is admissible on these services as the provision has been completed prior to 01/04/2011. - decided in favour of appellant with consequential relief

Summary

Issues:
- Challenge to disallowance of Cenvat credit on service tax paid for construction services
- Interpretation of input service definition under Cenvat credit rules, 2004 post-April 2011

Analysis:
1. The appeal challenges the disallowance of Cenvat credit on service tax paid for construction services used in building construction. The appellant, engaged in manufacturing automotive rubber parts, availed these services for constructing a factory block and repairing an old building. The Department contended that credit is admissible only if services are used in manufacturing final products or providing taxable services. The order disallowed credit of Rs. 1,05,628, imposed penalties, and ordered recovery. The Commissioner (Appeals) upheld this decision, leading to the appeal before the Tribunal.

2. The primary issue revolves around whether the appellants are entitled to credit for service tax paid on construction services post-April 2011. The definition of input service under Cenvat credit rules excludes services for building construction post-April 2011. The appellant argued that construction was completed before this date, supported by documents like a completion letter from the construction company, ledger accounts, and payment details. Despite the invoice being issued after April 2011, the appellant demonstrated that the provision of service was completed earlier, aligning with CBEC circulars. The Tribunal held that denial of credit due to invoice timing was unjustified when service provision was completed before the exclusion date, allowing the credit.

3. The Tribunal's decision set aside the impugned order, allowing the appeal and granting consequential reliefs. The judgment emphasized the importance of completion date rather than invoice issuance for determining credit eligibility. This case highlights the significance of aligning service provision completion with relevant legal provisions to claim Cenvat credit successfully.