2018 (8) TMI 331 - AT - Service Tax

CENVAT Credit - input services - Whether the services such as architects service, construction service, management consultancy service, real estate agent service, erection and commissioning service etc. used for construction of the premises are admissible input services for taking CENVAT Credit as against the output service of the appellant i.e. renting of immovable property and other related services on which Service Tax has been discharged? Held that - Any service used by the service provider for providing an output service is admissible input service . Input service specifically includes amongst other services used in relation to setting up of premises of the provider of output service or an office relating to such provider. From the definition of input service, it is clear that the input service is not limited to the services for providing output service but it also includes the services for setting up the premises of provider of output service - In the present case, all the input services involved are used for setting up the premises In the case of Musaddilal Projects Ltd. Vs. Comm of C.Ex., Cus and ST, 2017 (4) TMI 951 - CESTAT HYDERABAD , it was held that various inputs and input services used for construction of a building were eligible for CENVAT Credit prior to the amendment of law from 01.04.2011 - The present case also relates to the pre-amendment period (i.e., June 2007 - March 2009). The CENVAT Credit is therefore admissible. Applicability of Circular dated 04.01.2008 - Held that - The proceedings before the Commissioner are vitiated and have been hit by administrative consideration - The Apex Court in the case of Orient Paper Mills Ltd. Vs. UOI, 1968 (5) TMI 15 - SUPREME COURT OF INDIA held that Appellate Authority which exercised quasi-judicial power should not be influenced by departmental clarifications and Board Tariff Ruling while adjudicating the cases. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against demand of CENVAT Credit under proviso to Section 73(1) of the Finance Act, 1994 along with interest and penalty imposed under Rule 15(4) of the CENVAT Credit Rules, 2004.
- Interpretation of the definition of "input service" under Rule 2(l) of CENVAT Credit Rules, 2004.
- Admissibility of CENVAT Credit on input services used for construction of premises for renting of immovable property.
- Applicability of Board Circular No. 98/1/2008-ST dated 04.01.2008 on availing CENVAT Credit.

Analysis:

The appellant appealed against the demand of CENVAT Credit confirmed by the Commissioner under proviso to Section 73(1) of the Finance Act, 1994, along with interest and penalty under Rule 15(4) of the CENVAT Credit Rules, 2004. The appellant, engaged in various taxable services, utilized CENVAT Credit on input services for renting of immovable properties, among other services. The Service Tax Department alleged wrongful availing of CENVAT Credit based on Board Circular No. 98/1/2008-ST. The appellant contended that the impugned order was contrary to statutory provisions permitting CENVAT Credit on input services for taxable services, including renting of immovable property. The appellant cited various decisions supporting the admissibility of CENVAT Credit on input services for construction of premises. The Tribunal analyzed the definition of "input service" under Rule 2(l) of CENVAT Credit Rules, 2004, emphasizing services used for setting up premises of output service providers. The Tribunal referred to precedents such as Musaddilal Projects Ltd. and Vamona Developers Pvt. Ltd., holding that input services for construction activities were eligible for CENVAT Credit. The Tribunal concluded that the impugned order denying CENVAT Credit was legally untenable, setting it aside in favor of the appellant.

The issue revolved around the admissibility of CENVAT Credit on input services used for constructing premises for renting of immovable property. The appellant argued that the impugned order failed to consider the statutory provisions allowing CENVAT Credit on input services for providing output services. The Tribunal examined the definition of "input service" under Rule 2(l) of CENVAT Credit Rules, 2004, emphasizing the inclusion of services for setting up premises of output service providers. Citing various decisions, including Musaddilal Projects Ltd. and Vamona Developers Pvt. Ltd., the Tribunal held that input services for construction activities were eligible for CENVAT Credit. The Tribunal found the impugned order contrary to law and set it aside, ruling in favor of the appellant.

The appellant challenged the applicability of Board Circular No. 98/1/2008-ST dated 04.01.2008 on availing CENVAT Credit. The appellant contended that the Circular was contrary to statutory law and cited precedents to support the admissibility of CENVAT Credit on input services for construction activities. The Tribunal, following the precedents and legal principles, found the Circular inapplicable and ruled in favor of the appellant, setting aside the impugned order.