2018 (6) TMI 255 - AT - Service Tax

Utilization of CENVAT credit - Whether credit of service tax paid on commercial or industrial construction service or works contract is admissible for payment of service tax on output service i.e. renting of immovable property service as building constructed was rented out to various parties? - Held that - This issue is no longer res integra as in case of Sai Samhita Storages P. Ltd. 2010 (4) TMI 484 - CESTAT, BANGALORE , it was held that the credit on construction service of a building where the output service is renting of immovable property service, has been held admissible - demand not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether credit of service tax paid on commercial or industrial construction service or works contract is admissible for payment of service tax on output service i.e. renting of immovable property service as building constructed was rented out to various parties.

Analysis:
The appellant availed cenvat credit for construction services used in a commercial building rented out to parties. The Tribunal referred to the case of Sai Samhita Storages P. Ltd. upheld by the Andhra Pradesh High Court, allowing credit on construction service for renting immovable property service. In the appellant's case, the Tribunal decided in their favor, stating that the service tax liability on renting immovable property arises only after the property is constructed. The Tribunal rejected the Revenue's reliance on Circular No. 98/1/2008-ST and held the credit admissible based on the definition of 'input service.' The Tribunal emphasized that the construction must be completed before renting out, similar to the case of Navaratna S.G. Highway. The judgment highlighted the eligibility of credit for goods used in providing an output service, as per the CENVAT Credit Rules, 2004. The Tribunal concluded that the demand was not sustainable, setting aside the impugned order.

The appellant argued that the show cause notice issued beyond the normal period was time-barred, citing relevant judgments like Hyderabad Polymers and ECE Industries Ltd. The Tribunal considered this argument and held that the demand for the period beyond the normal limit was not valid, based on legal precedents. The appellant's reliance on various judgments and the consistent rulings in favor of the assessee supported their claim against the time-barred notice. The Tribunal analyzed the issue thoroughly, aligning with the legal principles established in previous cases and statutory provisions.

The judgment emphasized the importance of completing construction before renting out the property to justify availing credit on construction services for output services. The Tribunal's decision was based on legal interpretations, precedents, and the definition of 'input service' under the CENVAT Credit Rules. The analysis focused on the eligibility of credit and the timing of service tax liability concerning the construction and renting of immovable property. The detailed examination of relevant case laws and legal provisions ensured a comprehensive understanding of the issue at hand and provided a clear rationale for setting aside the impugned order.