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2018 (1) TMI 379 - AT - Service TaxCENVAT credit - input/input services - construction of commercial, industrial and residential premises - whether the service tax paid on Works Contract Services, Project Management and Architectural Professional Services can be considered as input services for the appellant when these services are used for construction of hotel? - Held that - the adjudicating authority was in error to rely upon the Board Circular No. 98/1/2008-ST dated 04.01.2008 in as much, the definition of input services during the relevant period does not bar availment of CENVAT credit all input services. Input services includes the services used in relation to settingup, modernization, renovation of premises of provider of output services - In the case in hand, the definition is reproduced as above categorically will apply and the clarification given by the Board in CBEC Circular dated 04.01.2008 is going beyond the definition. It is not disputed that jetty was constructed and input credit was claimed on cement and steel. The aforesaid definition of Rule 2(k) was applicable and Explanation 2 did not provide that cement and steel would not be eligible for input credit. According to learned Counsel for the appellant, the appellant is not manufacturer and, therefore, the provisions of Explanation 2 of Rule 2(k) would be applicable only to the factory and manufacturer. The appellant is neither having any factory nor he is manufacturer. The appellant is a service provider of port. As all the inputs/inputs service has been used by the appellant for construction of a building which has been let out by the appellant and paying service tax thereon under the category of Renting of Immovable Service therefore, the appellant is entitled to avail cenvat credit - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Denial of CENVAT credit on input/input services used for construction. 2. Applicability of Rule 2(k) and Rule 2(l) of the CENVAT Credit Rules, 2004. 3. Impact of premises being considered immovable property on CENVAT credit eligibility. 4. Utilization of CENVAT credit availed prior to 01.04.2011 after 01.04.2011. 5. Relevance of judicial precedents and CBEC circulars. Detailed Analysis: 1. Denial of CENVAT credit on input/input services used for construction: The appellant, engaged in construction activities, availed CENVAT credit on input services used for constructing premises before 01.04.2011 but utilized the credit between 01.04.2011 and 31.03.2012 for paying service tax under the category of Renting of Immovable Service. The revenue issued a show cause notice denying CENVAT credit on the grounds that the services were used for constructing immovable property, which does not qualify as goods or capital goods. 2. Applicability of Rule 2(k) and Rule 2(l) of the CENVAT Credit Rules, 2004: The appellant argued that according to Rule 2(k) and Rule 2(l) of the CENVAT Credit Rules, 2004, any input used for providing output service qualifies for CENVAT credit. The appellant cited the Madras High Court's decision in Dalmia Cements (Bharat) Ltd. and the Andhra Pradesh High Court's decision in Sai Sahmita Storages (P) Ltd., which supported the entitlement to CENVAT credit for services used in construction activities. 3. Impact of premises being considered immovable property on CENVAT credit eligibility: The revenue contended that since the premises became immovable property, they lost the character of goods, making the input services used for their construction ineligible for CENVAT credit. However, the tribunal found this argument irrelevant as the services were availed before 01.04.2011, and there was no bar on utilizing such credit after this date. 4. Utilization of CENVAT credit availed prior to 01.04.2011 after 01.04.2011: The tribunal noted that the appellant availed CENVAT credit on input services before 01.04.2011 and utilized it after this date. There was no prohibition in the CENVAT Credit Rules, 2004, against such utilization. The tribunal referenced the Lemon Tree Hotel case, where similar facts led to a decision favoring the eligibility of CENVAT credit on services used for constructing a hotel building, which was later used to provide taxable output services. 5. Relevance of judicial precedents and CBEC circulars: The tribunal considered the CBEC Circular No. 98/01/2008-ST dated 04.01.98, which the revenue cited to deny credit. However, the tribunal found that the definition of input services during the relevant period did not bar availing CENVAT credit on input services used for setting up premises. The tribunal also referred to the Gujarat High Court's decision in Mundra Ports and Special Economic Zone Ltd., which supported the eligibility of CENVAT credit on input services used for creating immovable property. Conclusion: The tribunal concluded that the appellant was entitled to avail CENVAT credit on input services used for constructing premises that were later let out, as these services were used to provide taxable output services. The tribunal set aside the impugned order and allowed the appeal with consequential relief, emphasizing that the utilization of CENVAT credit availed before 01.04.2011 was permissible, and the appellant's case was supported by relevant judicial precedents.
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