2019 (10) TMI 1104 - AT - Service Tax

CENVAT credit - input services - Construction Service - Architect Service - Cleaning Service (pest control) - Goods Transport Agency Service - Insurance Service - Interior Decorator Service - period April 2008 to March 2009. Construction service - HELD THAT - It cannot be doubted that the Appellant is using wireless equipments for providing telecommunication service and for this purpose radio antennas are used to transmit and receive radio signals. These antennas which transmit signals are, therefore, an integral and essential part of the service. They are mounted on towers so as to raise the heights of the antennas. Civil work is, therefore, required to be undertaken for erection of the towers - Construction service is, therefore, an integral part of the telecommunication services and is used for providing the output service. It, therefore, qualifies as an input service - reliance placed in the case of VODAFONE ESSAR SOUTH LTD., AIRCEL CELLULAR LTD., DISHNET WIRELESS LTD. VERSUS CST CHENNAI 2018 (1) TMI 1218 - CESTAT CHENNAI where it was held that for providing telecommunication service, the erection and construction of telecommunication towers is a basic essential requirement and would be an input service - Credit allowed. Clearing and forwarding service - HELD THAT - The requisite custom clearance at the port is required for the clearance of the goods which include hardware and software forming port of the BSC as well as optical fibre cables. The said clearing and forwarding service would, therefore, be an input service - reliance placed in the case of COMMISSIONER OF CENTRAL EXCISE, SERVICE TAX AND CUSTOMS, BANGALORE-II VERSUS NASH INDUSTRIES 2016 (6) TMI 155 - CESTAT BANGALORE - credit allowed. Real estate service - HELD THAT - It is seen that the Appellant has used this service for procuring suitable plots for construction of the shops of the Appellant. It is, therefore, in relation to the business of the Appellant and, therefore, would be eligible for input service - reliance placed in the case of DELTA ENERGY SYSTEMS LTD. VERSUS COMMISSIONER OF C. EX., DELHI-III 2014 (1) TMI 664 - CESTAT NEW DELHI - credit allowed. Thus, the Appellant was entitled to avail the Cenvat Credit on the three services, namely, construction service, clearing and forwarding service and real estate service - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Denial of Cenvat Credit on Construction Service.
2. Denial of Cenvat Credit on Clearing and Forwarding Service.
3. Denial of Cenvat Credit on Real Estate Service.

Detailed Analysis:

1. Denial of Cenvat Credit on Construction Service:
The Commissioner denied Cenvat Credit on construction service, reasoning that:
- The service provider’s bills did not mention the service category under the Finance Act, 1994.
- There was no nexus between the service and telecommunication service.
- The equipment could function without such structures.
- The service did not fall under the definition of 'input service' as per Rule 2(l) of the 2004 Rules.

The Appellant argued that the construction services were essential for setting up the infrastructure for telecommunication towers, which are integral to providing telecommunication services. The Tribunal agreed with the Appellant, noting that construction services are used for setting up the premises of the service provider and therefore qualify as 'input service' under Rule 2(l) of the 2004 Rules. This view was supported by previous decisions in Vodafone Essar South Ltd. and other related cases, which held that erection and construction of telecommunication towers are essential requirements for telecommunication service and thus qualify as input services.

2. Denial of Cenvat Credit on Clearing and Forwarding Service:
The Commissioner denied credit on clearing and forwarding service, stating:
- The correct classification should be 'Customs House Agent Service.'
- There was no nexus with telecommunication service.

The Appellant contended that the service included obtaining customs clearance for imported goods like hardware and software essential for the Base Station Controller (BSC) and optical fibre cables, which are integral to telecommunication services. The Tribunal found merit in the Appellant's argument, highlighting that clearing and forwarding services are necessary for procuring inputs for telecommunication services. This view was supported by the decision in Commissioner of C.Ex. & S.T. & Cus., Bangalore-II Versus Nash Industries, which recognized the broad scope of 'input service' and its relevance to manufacturing or business activities.

3. Denial of Cenvat Credit on Real Estate Service:
The Commissioner denied credit on real estate service, citing:
- Incorrect nomenclature used for the taxable service.
- No nexus with the provision of telecommunication service.

The Appellant argued that the service was used for procuring plots for constructing shops, which is related to the business activities of the Appellant. The Tribunal agreed, noting that the service was used in relation to the business and thus qualifies as an input service. This view was supported by the decision in Delta Energy Systems Ltd. Vs. Commissioner Of C. Ex., Delhi-III, which held that services related to the business of the Appellant are covered by the definition of input services.

Conclusion:
The Tribunal concluded that the Appellant was entitled to avail Cenvat Credit on construction service, clearing and forwarding service, and real estate service. The order passed by the Commissioner denying Cenvat Credit for these services was set aside, and the appeal was allowed.