2013 (9) TMI 669 - HC - Service Tax

Appeal against the stay order directing the petitioner to pre-deposit 35% of the Credit - Wrong Utilization of CENVAT credit - The assessee was a real estate company engaged in construction of shopping malls - The appellant had availed CENVAT credit on input services and CENVAT credit on inputs used for construction of buildings Held that - Both Judicial Member and the Technical Member agreed that the appellant is not entitled to CENVAT credits on inputs. The appellant got the building constructed from the works contract service provider - The credit of service tax paid by the work contract service provider already stand availed by the appellant - if there was any doubt with regard to any benefit of CENVAT credit on the inputs for construction of building the fact that the appellant had engaged works contract service provider, who had availed the benefit of CENVAT credit by opting for payment of service tax at a lesser rate on the condition of non-availability of credit of duty paid on inputs used in construction of building, such benefit could not have been claimed by the appellant. By an amendment vide Notification dated 10.9.2004 CENVAT Credit Rules 2004 have been amended and by which the input credit on any goods used for construction of buildings, civil structures or parts had been excluded from the meaning input under Rule 2 (k). Waiver of Pre-deposit - Whether pre-deposit of 35% of the total Cenvat Credit denied by the order was to be called for admitting these appeals as directed by the Judicial Member Held that - There was no error in the orders passed by the CESTAT directing the appellant to deposit 35% of the CENVAT credit - We make it clear that the appellant had been given stay of pre-deposit of the entire CENVAT credit availed of input service and amounts to small fraction of entire liability of CENVAT Credit and input denied, which was still subject matter of the appeal.

Summary

Issues:
1. Appeal against pre-deposit order/stay order under Section 35-G of the Central Excise Act, 1944.
2. Allegations of wrongly availed CENVAT credit on input services and inputs.
3. Disallowance of CENVAT credit and demand of service tax.
4. Difference of opinion on pre-deposit requirement for CENVAT credit on input services.
5. Interpretation of CENVAT credit rules for construction services.
6. Applicability of Andhra Pradesh High Court judgment on input credit.
7. Exclusion of input credit for construction goods under CENVAT Credit Rules 2004.

Analysis:
The appellant, a real estate company constructing shopping malls, appealed against a pre-deposit order concerning the denial of CENVAT credit on inputs and input services. A show cause notice alleged wrongful availment of CENVAT credit, leading to disallowance and demand of service tax. The CESTAT's order raised a difference of opinion on pre-deposit necessity for CENVAT credit on input services, ultimately requiring 35% pre-deposit. The 3rd Member emphasized the eligibility of CENVAT credit for certain input services in construction activities, aligning with the technical member's view.

The judgment of Andhra Pradesh High Court was cited concerning input credit denial on construction materials for storage services. However, the CESTAT distinguished this judgment, highlighting the appellant's engagement in constructing commercial malls and renting spaces, not the warehouse's direct construction. The appellant's use of works contract services provider's credit was deemed inapplicable to claim CENVAT credit on inputs. The court noted the exclusion of input credit for construction goods under amended CENVAT Credit Rules 2004.

Ultimately, the High Court upheld the CESTAT's decision, requiring the appellant to deposit 35% of the disputed CENVAT credit. The court clarified that this deposit was only a fraction of the total liability, pending appeal. The appeal was dismissed, emphasizing that the judgment's observations would not impact the case's merits during the final hearing at CESTAT.