2021 (8) TMI 811 - AT - Service Tax

CENVAT Credit - input service/capital goods - import of passenger lift - construction of a complex, building, civil structure etc. - declared service or not - Rule 2A of Service Tax Determination of Value Rules, 2006 - demand of interest and penalty - HELD THAT - When the passenger lift was imported, it was classified under Chapter 84 and the Classification was accepted by the Department and once the classification is accepted by the Department, it cannot be changed at the receiver s end by the Department in view of various decisions relied upon by the appellant. Further, as per the impugned order, two conditions have to be fulfilled for capital goods to claim CENVAT credit as mentioned in Rule 2(a) (A) of CCR, 2004 for eligibility of credit (a) They should fall under the category mentioned in Rule 2(a)(A), (b) They should be used as mentioned in Rule 2(a)(A) whereas as per the Commissioner, only first condition is satisfied and as per the learned Commissioner, the entire works contract is not service, only service portion in works contract is service which is evident by section 66E(h) of the Finance Act, 1994. The lift is essential for providing the output service and therefore, the appellant has fulfilled both the conditions to avail the credit, hence the denial of credit is not sustainable, simply because the lifts are fitted into the building does not have an impact on treatment of lifts as capital goods because even after fitting into the building, lift is a lift and covered under Chapter 84 and cannot be considered as input just to deny the benefit of CENVAT credit. As per the Construction Agreements also, lift is one of the common facility provided in the project and lift is a capital goods being used for providing taxable services on which service tax is being paid by the appellant, therefore denying benefit of credit on capital goods is not proper - the basis to deny the credit is not legally sustainable. The appellant is entitled to CENVAT credit on lift which is capital goods and the denial of the same is not sustainable - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against order denying CENVAT credit on passenger lifts.

Analysis:
The appellant, a Limited Liability Partnership Firm, engaged in construction activities, imported passenger lifts and availed CVD credit. The department raised concerns during a scrutiny, leading to a demand for recovery of irregular CENVAT credit. The Original Adjudicating Authority confirmed the demand and imposed a penalty. The Commissioner (Appeals) upheld the order, prompting the present appeal. The appellant argued that denial of CENVAT credit on passenger lifts was unsustainable, citing legal provisions and judicial precedents supporting their claim. They emphasized that works contracts should be taxed separately from services. The appellant contended that lifts should be considered capital goods for credit availment. They referenced various decisions to support their arguments.

The appellant's consultant highlighted that capital goods were used for providing output services, and the imported lifts were essential for construction activities. They argued that denying credit based on a material versus service portion distinction was incorrect. The appellant fulfilled conditions for availing credit under CENVAT Credit Rules. They emphasized that lifts were crucial for providing taxable services, and denial of credit was unwarranted. The consultant argued that the impugned order's interpretation was beyond statutory provisions and lacked legal sustainability. They also addressed the issue of interest and penalty, asserting that eligibility for credit negated the need for such charges.

The Authorized Representative defended the impugned order, citing a decision by the Authority for Advance Ruling. After considering submissions, the Tribunal found that the lifts were classified under Chapter 84 upon import, accepted by the Department. The Tribunal noted the conditions for claiming CENVAT credit on capital goods and disagreed with the Commissioner's interpretation. It deemed the denial of credit unsustainable, emphasizing that the lifts were integral to providing output services. The Tribunal rejected the artificial bifurcation of activities and upheld the appellant's entitlement to CENVAT credit on lifts, setting aside the impugned order. The decision was based on legal principles and precedents cited by the appellant, distinguishing the case from the one referenced by the Authorized Representative.