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2017 (11) TMI 301 - AT - Service TaxCENVAT credit - input - doors, windows, frames tiles, cement etc. used for construction of shopping mall - capital goods - Lift, Escalator, Chillers, DG Sets, Heat Exchangers Wire, Cables, Fire Equipments, Water Pumps etc. which was installed in the mall for renting of the shops in the mall - input services - architect service, business auxiliary service, C&F agency service, cargo handling service, works contract service, consulting engineer service, erection, commissioning and installation service, these services were used in the construction of mall - insurance, management maintenance and repair service etc., these services were used for the operation of the shopping mall. Inputs - steel cement, doors, windows etc. used for construction of shopping mall - Held that - As per the definition of input for the purpose of providing service, it is clear that only on those inputs Cenvat is allowed which are used for providing the output service. In the present case, cement, steel, for steel, angles, channels etc. were not used for providing output service i.e renting of immovable property. The same was used for providing construction service which is not the output service of the appellant, therefore the cenvat credit is not admissible. Moreover, w.e.f. 7.7.2009 the said goods were excluded from the definition of input service - demand upheld. Capital goods - denial on the ground that on the ground that these capital goods after installation become immovable goods, therefore the credit is not admissible - Held that - all the capital goods were cleared by the supplier on payment of duty therefore the capital goods as such can not be said that it is immovable goods. Merely by installing the capital goods it does not become an immovable goods. If this contention of the adjudicating authority is accepted then all the capital goods such as machinery, equipments, appliances installed in the factory for production will not be eligible for cenvat credit. Therefore merely by installation of duty paid capital goods, it can not be said that it is immovable goods all the capital goods were used in the shopping mall to facilitate the shop owners for operation of the mall, who have been given the shops on rent by the appellant. Therefore all these capital goods were directly used by the appellant for providing output service i.e. renting of immovable property service. Accordingly the cenvat credit on the capital goods is admissible - demand set aside. Input service - whether the input service credit is at all admissible for the construction of a mall which is used for providing Renting of Immoveable Property Service? - Held that - for the input services for which input service tax credit was availed at Pune, the invoices are addressed to their Bombay office. However this will not be a bar in availing the credit as the appellant had taken centralized registration at Pune before availing the credit and they did not avail credit on any input services in Mumbai as reflected in the relevant ST-3 returns. It was also submitted by them that there is no other project in the company. Therefore we find no reason to deny the credit on this ground - demand set aside. Delay in taking credit - Held that - the appellant took the credit only when the mall was completed. Prior to that they may not have been sure whether the property is to be sold or rented. Actually 20% of the property was sold out. Therefore they took cenvat credit when the remaining property was ready to be rented out. In these circumstances, in our considered view, the substantial benefit cannot be denied to them and the delay can be ignored especially when there is no violation of legal provisions. CENVAT credit - services such as advertisement, broadcasting, C.A., cleaning service, insurance service, management maintenance and repair service etc. - denial on the ground that these services have no nexus to the output service of renting of immovable property - Held that - the service used whether prior to construction or after completion of the construction, the cenvat credit is admissible for the reason that the services used prior to the construction is in relation to the construction of service which is admissible input service. Once demand was of wrongly cenvat credit is proposed, there cannot be an another demand of recovery of service tax which was discharged by utilizing so called wrongly availed credit for the reason that by recovery of the wrongly availed credit whatever service tax paid by utilizing cenvat credit will hold good, no further recovery can be made. Therefore the demand of service tax even though paid by utilising the cenvat credit again confirmed for recovery is not legal and proper. Therefore the demand of service tax amounting to ₹ 2,06,67,771/- is set aside. Appeal allowed in part.
Issues Involved:
1. Admissibility of Cenvat Credit on inputs used for construction of a shopping mall. 2. Admissibility of Cenvat Credit on capital goods used in the shopping mall. 3. Admissibility of Cenvat Credit on various services used for the construction and operation of the shopping mall. 4. Demand of Service Tax due to utilization of inadmissible Cenvat Credit. 5. Imposition of penalties and interest on the confirmed amounts. Issue-wise Detailed Analysis: 1. Admissibility of Cenvat Credit on Inputs Used for Construction of a Shopping Mall: The tribunal examined the admissibility of Cenvat Credit amounting to ?1,63,67,075 on goods such as steel, cement, doors, windows, etc., used for constructing the shopping mall. The tribunal referenced the definition of inputs under the Cenvat Credit Rules, 2004, and the judgment of the Bombay High Court in Bharti Airtel Ltd., which clarified that inputs used for constructing a mall are not considered inputs for providing the output service of renting immovable property. Consequently, the tribunal upheld the demand for ?1,63,67,075, disallowing the Cenvat Credit on these goods. 2. Admissibility of Cenvat Credit on Capital Goods Used in the Shopping Mall: The tribunal reviewed the admissibility of Cenvat Credit amounting to ?2,26,36,646 on capital goods such as lifts, escalators, chillers, DG sets, etc., installed in the mall. The adjudicating authority had denied the credit on the grounds that these capital goods became immovable property upon installation. However, the tribunal found that these capital goods were cleared by the supplier on payment of duty and merely installing them did not render them immovable property. These capital goods were essential for the operation of the mall and thus directly related to providing the output service of renting immovable property. The tribunal set aside the demand of ?2,26,36,646, allowing the Cenvat Credit on these capital goods. 3. Admissibility of Cenvat Credit on Various Services Used for Construction and Operation of the Shopping Mall: The tribunal considered the admissibility of Cenvat Credit amounting to ?1,01,76,663 on various services used for constructing the mall, such as architect services, business auxiliary services, consulting engineer services, etc. The tribunal referred to the definition of input services under Rule 2(l) of the Cenvat Credit Rules, 2004, which includes services used for setting up the premises of the provider of output service. The tribunal cited several judgments, including Maharashtra Cricket Association and Oberoi Mall Ltd., which supported the view that services used for constructing premises for providing output services are admissible input services. Consequently, the tribunal set aside the demand of ?1,01,76,663, allowing the Cenvat Credit on these services. The tribunal also examined the admissibility of Cenvat Credit amounting to ?55,01,660 on services used before and after the construction of the shopping mall, such as advertisement services, broadcasting services, cleaning services, etc. The tribunal found that these services were directly related to the output service of renting immovable property and thus admissible as input services. The tribunal set aside the demand of ?55,01,660, allowing the Cenvat Credit on these services. 4. Demand of Service Tax Due to Utilization of Inadmissible Cenvat Credit: The tribunal addressed the demand for service tax amounting to ?2,06,07,771, which was confirmed on the grounds that service tax was paid using inadmissible Cenvat Credit. The tribunal clarified that once the demand for wrongly availed Cenvat Credit is proposed, there cannot be a separate demand for recovery of service tax paid using such credit. The recovery of wrongly availed credit ensures that the service tax paid by utilizing the credit remains valid. Therefore, the tribunal set aside the demand of ?2,06,07,771. 5. Imposition of Penalties and Interest on the Confirmed Amounts: The tribunal's decision to set aside the demands for Cenvat Credit on capital goods and various services, as well as the service tax demand, implied that the penalties and interest imposed on these amounts were also not sustainable. Consequently, the tribunal's order resulted in the partial allowance of the appeal, with the demands and penalties related to inadmissible Cenvat Credit on inputs used for construction being upheld. Conclusion: The appeal was partly allowed, with the tribunal upholding the demand for Cenvat Credit on inputs used for constructing the shopping mall but setting aside the demands for Cenvat Credit on capital goods and various services, as well as the service tax demand and associated penalties and interest. The tribunal's decision was based on a detailed interpretation of the definitions and relevant judgments, ensuring that the credit was admissible for services and capital goods directly related to providing the output service of renting immovable property.
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