2024 (8) TMI 604 - AT - Service Tax

Cenvat credit on immovable property constructed by them after issuance of completion certificate - Applicability of Rule 6 of CCR - extended period of limitation - interest and penalty. CENVAT Credit - HELD THAT - The appellant is not entitle to the cenvat credit availed during the period October, 2014 to June, 2017 as the completion certificate was issued on 20.12.2012 and by virtue thereof the transaction was out of the purview of service tax and was to be treated as mere sale of goods. Needless to mention, the requirement under CCR is that cenvat credit in respect of inputs may be taken immediately on receipt of the inputs and the provider of output service shall not take cenvat credit after one year from the date of issuance of the documents. Invocation of the extended period of limitation - HELD THAT - The appellant was aware that after the issuance of the completion certificate, the immovable property is no longer treated as a service rather, it is a mere transfer of the title of goods or immovable property, and hence, for the period October 2014 to June 2017, the appellant was not entitle to avail the credit. The shelter sought to be taken by the appellant on the basis of the Explanation-3 inserted in Rule 6 is misconceived - In the circumstances, the Revenue has rightly invoked the period of limitation under Section 73 (1) of the Act. Penalty - HELD THAT - The imposition of penalty under Section 78 of the Act is justified and the levy of interest is upheld. There are no merit in the appeal - appeal dismissed.

Summary

Issues Involved:

1. Eligibility of Cenvat Credit post-issuance of completion certificate.
2. Applicability of Rule 6 of Cenvat Credit Rules, 2004.
3. Invocation of the extended period of limitation.
4. Imposition of penalty under Section 78 of the Finance Act, 1994.
5. Levy of interest under Section 75 of the Finance Act, 1994.

Issue-Wise Detailed Analysis:

1. Eligibility of Cenvat Credit post-issuance of completion certificate:

The appellant, engaged in providing taxable services of construction of residential complexes, continued to avail Cenvat credit on input services even after receiving the completion certificate on 20.12.2012. The Tribunal noted that as per Section 65B(44)(a) and Section 66E of the Finance Act, 1994, once a completion certificate is issued, the sale of immovable property is not considered a "service" and hence, Cenvat credit cannot be availed. The Tribunal rejected the appellant's argument that the insertion of Explanation-3 in Rule 6 of CCR, 2004 on 01.04.2016, which included activities not defined as "service" under Section 65B(44), was prospective and thus did not apply to the period before the said date. The Tribunal emphasized that the main substantive provisions already reflected that after the issuance of the completion certificate, the appellant was not liable to pay service tax and logically could not avail Cenvat credit.

2. Applicability of Rule 6 of Cenvat Credit Rules, 2004:

The appellant contended that Rule 6 of CCR could not be invoked as the credit was eligible at the time of availment but became ineligible later. The Tribunal clarified that the credit was availed after the issuance of the completion certificate, rendering it ineligible ab initio. The Tribunal referred to the Delhi High Court's decision in M/s. Lally Automobiles Pvt. Ltd., which stated that activities not classified as "service" or "manufacture" fall outside the purview of the Central Excise Act and Finance Act, 1994, making the assessee ineligible for input-service tax credit.

3. Invocation of the extended period of limitation:

The Tribunal upheld the invocation of the extended period of limitation under Section 73(1) of the Finance Act, 1994. It was noted that the appellant was aware that after the issuance of the completion certificate, the immovable property was no longer treated as a service but as a mere transfer of title in goods or immovable property. The Tribunal found the appellant's reliance on Explanation-3 of Rule 6 to be misconceived.

4. Imposition of penalty under Section 78 of the Finance Act, 1994:

The Tribunal justified the imposition of penalty under Section 78 of the Finance Act, 1994, on the grounds that the appellant continued to avail Cenvat credit despite knowing that the completion certificate had been issued, making the credit ineligible. The appellant's actions were deemed to involve wilful suppression of facts, warranting the penalty.

5. Levy of interest under Section 75 of the Finance Act, 1994:

The Tribunal upheld the levy of interest under Section 75 of the Finance Act, 1994, on the ineligible Cenvat credit availed by the appellant. The Tribunal emphasized that the credit availed after the issuance of the completion certificate was not permissible, and hence, the interest levied was justified.

Conclusion:

The appeal was dismissed, and the Tribunal upheld the order of the Commissioner (Appeals), confirming the demand of service tax along with interest and penalty. The Tribunal found no merit in the appellant's arguments and concluded that the appellant was not entitled to the Cenvat credit availed during the period October 2014 to June 2017, as the completion certificate was issued on 20.12.2012, making the transaction a mere sale of goods and not a service.