2018 (2) TMI 1433 - AT - Central Excise

CENVAT credit - input services credit in respect of premises, which is being leased out - The department was of the view that appellant has not used the input services, on which credit was availed, in or in relation to the manufacture of their finished products - Held that - The input credit whether availed on capital goods, inputs or input services is accounted in a common pool of credit. While utilising credit it is not necessary that there should be one to one correlation - the Cenvat Credit Rules does not prohibit the credit availed on capital goods to be utilized to discharge duty on finished products or for payment of service tax. So also the credit availed on payment of service tax can be utilized for discharge of central excise duty. The Tribunal in the case of Nvaratna S.G. Highway Prop. Pvt Ltd. 2012 (7) TMI 316 - CESTAT, AHMEDABAD held that without construction of mall / building the renting of immovable property services cannot be provided and therefore construction service is an eligible service for credit for providing output service of Renting of immovable property. The disallowance of input service credit is unjustified - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility of input service credit on construction services used for leasing out a portion of the building.
- Interpretation of the definition of input service under Rule 2(e).
- Applicability of Circular No. 98.01.2008 regarding input service credit.
- Maintenance of separate accounts for credit attributable to manufacturing and service providing activities.

Analysis:

Issue 1: Eligibility of input service credit on construction services used for leasing out a portion of the building.
The appellants availed Cenvat Credit of service tax paid for construction services during the period 2008-2009. The department alleged that the appellant did not use the input services in relation to the manufacture of finished products. The appellant argued that they are both manufacturer and service provider, eligible for credit, and immediately reversed the credit when necessary. The department relied on Circular No. 98.01.2008 to deny the credit. The Tribunal held that the disallowance of input service credit was unjustified, allowing the appeal with consequential reliefs.

Issue 2: Interpretation of the definition of input service under Rule 2(e).
The definition of input service under Rule 2(e) includes services used directly or indirectly in or in relation to the manufacture of final products. The appellants contended that they are eligible for credit on construction services for the portion used for manufacturing activity. The dispute focused on the credit availed on the portion leased out. The department argued that input credit can only be taken if the output is a service liable to service tax or goods liable to excise duty.

Issue 3: Applicability of Circular No. 98.01.2008 regarding input service credit.
The Circular clarified that input credit of service tax can be taken only if the output is a service liable to service tax or goods liable to excise duty. The Tribunal noted that the Circular is not binding and emphasized that the Cenvat Credit Rules do not prohibit utilizing credit for different purposes. The Tribunal referenced a case where the Circular was discussed, highlighting the flexibility in credit utilization.

Issue 4: Maintenance of separate accounts for credit attributable to manufacturing and service providing activities.
The Department objected to the appellant not maintaining separate accounts for credit attributable to manufacturing and service providing activities. However, the Tribunal held that the common Cenvat Credit Rules allow for utilizing credit from a common pool for different purposes without the need for separate accounts. The Tribunal emphasized that the appellant's registration as a service provider of renting of immovable property validated the credit utilization.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal and providing consequential reliefs. The judgment emphasized the flexibility in credit utilization under the Cenvat Credit Rules and the validity of credit availed by the appellants for both manufacturing and service providing activities.