2020 (6) TMI 62 - AT - Service Tax

CENVAT Credit - input services - commercial construction services - club membership fee - maintenance charges - Output services provided is of Renting of Immovable Property Services - period June, 2007 to September, 2008. Commercial Construction Services - HELD THAT - Admittedly, the premises for which commercial construction services were received were let out by the appellant for providing the services of renting of immovable property. These admissions clarify had there been no constructed building there would have been no possibility for any service of being rented out to be provided by the Appellant. Thus, it becomes clear that the services of commercial construction as were received by the appellant for providing the output service have a direct nexus to each other. In fact, in view of above definition such services fall under the inclusive part of the definition of input services - the appellant for whom the said commercial construction services is already been held to be an input service, he is held to have committed no error while taking the Cenvat credit of the payment made towards such service. Club Membership service and the Cenvat credit availed on the fee paid for the same - HELD THAT - It was the appellant's burden to prove that this was also the service which was required for enabling them to render the output service of renting of immovable property. It is observed that except for the mention that club was used as a place to have contact with the people of standing there is no other submission of the appellant to justify the service to the input service - no nexus has been established between the availment of Club Membership and the output service of of the appellant i.e. Renting of Immovable Property - credit cannot be allowed. Maintenance and Repair Services - HELD THAT - Perusal of the order of the adjudicating authority below shows that the Cenvat credit on Maintenance and Repair Services has been denied for want of nexus of the said services to the output service provided by the Appellant. In absence of the said Bill but in view of the acknowledgement that the Maintenance and Repair Services were received for the premises which have been rented out by the Appellant and also that the Bill is for the date when the entry became taxable, the Maintenance and Repair Services are also clearly inclusive in the definition of input services and the appellant has rightly availed the Cenvat credit thereof. Time Limitation - HELD THAT - It becomes clear that there is no wilful suppression on behalf of the appellant as is alleged. It stands clear that the show cause notice since being issued beyond a delay of three years - demand is barred by time - Consequent thereto irrespective that the club membership fee is held to not to be an input service to avail the Cenvat credit by the appellant but the said demand also stands set aside being show cause notice being barred by time. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Eligibility of Cenvat credit on commercial construction services.
2. Eligibility of Cenvat credit on club membership fees.
3. Eligibility of Cenvat credit on maintenance and repair services.
4. Validity of the show cause notice based on the limitation period.

Issue-wise Detailed Analysis:

1. Eligibility of Cenvat credit on commercial construction services:
The appellant, engaged in providing Renting of Immovable Property services, availed Cenvat credit on commercial construction services. The department contested this, citing a letter from M/s R.K. Enterprises denying the provision of such services. The Tribunal noted that the letter was not a relied-upon document in the show cause notice and was not provided to the appellant. The Tribunal found that the commercial construction services were indeed used for the rented premises, establishing a direct nexus between the input service (construction) and the output service (renting). The Tribunal supported this with the Gujarat High Court's decision in Mudra Ports & SEZ Ltd., confirming the eligibility of Cenvat credit for construction services used for renting out properties.

2. Eligibility of Cenvat credit on club membership fees:
The appellant claimed Cenvat credit on club membership fees, arguing that the membership facilitated business operations. However, the Tribunal found no substantial evidence or documentation to support this claim. The Tribunal referenced the ITC Ltd case, which was not applicable here as the appellant did not use the club for business meetings or promotional activities. Thus, the Tribunal upheld the denial of Cenvat credit for club membership fees due to the lack of proven nexus with the output service.

3. Eligibility of Cenvat credit on maintenance and repair services:
The department argued that maintenance and repair services were received before they became taxable on 01.06.2007. The appellant contended that the services were received and paid for in June 2007. The Tribunal noted the absence of the relevant bill but acknowledged that the services were for the rented premises and were taxable at the time of receipt. Consequently, the Tribunal held that maintenance and repair services were input services and the appellant rightly availed Cenvat credit.

4. Validity of the show cause notice based on the limitation period:
The Tribunal observed that the audit was conducted in 2009, with the appellant responding promptly. However, the show cause notice was issued in 2012, beyond the permissible one-year period. The Tribunal found no evidence of wilful suppression by the appellant, as the services were genuinely received for providing the output service. The Tribunal held that the delay in issuing the show cause notice was unjustified, rendering it barred by time. Therefore, the demand for recovery, including for the club membership fee, was set aside due to the time-barred notice.

Conclusion:
The Tribunal allowed the appeal, confirming the eligibility of Cenvat credit for commercial construction and maintenance and repair services, while denying the credit for club membership fees. The show cause notice was deemed time-barred, leading to the setting aside of the entire demand.