2013 (10) TMI 912 - AT - Service Tax

Denial of CENVAT Credit - input services for the purpose of renting of immovable property - input services for setting up of factory premises - Management, Maintenance or Repair Service - stay - Held that - Commissioner observed that after construction of the building, it became a source of collection of rent which became taxable service at a later period. In our considered view, the definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004 provides any service used in relation to setting up, modernization, renovation or repairs of factory, premises of provider of output service . There is no dispute that input service was utilized for setting up the building and after completion of the building the applicant used for renting of immovable property which is an output service. So the denial of credit on input service utilized on renting of immovable property, prima facie is not justified Regarding the denial of credit on input service used in Management, Maintenance or Repair Service , on perusal of the list of various input services, we find that some services such as Architect Service, Interior decorator, Insurance Auxiliary Service, Erection and Commissioning or Installation, Security Agency Services etc. cannot be utilized for the output service namely Management, Maintenance or Repair Service - prima facie credit is not allowable. Demand of service tax - Input service on electricity charges - Held that - electricity is goods as held by the Courts in several cases. DG sets is also used for generating electricity - applicant has failed to make out a prima facie case for waiver of predeposit of entire amount of tax along with interest and penalty. - Stay granted partly.

Summary

Issues:
1. Denial of CENVAT credit on construction services
2. Service Tax on electricity charges
3. Service Tax on fit out charges

Analysis:

Issue 1: Denial of CENVAT credit on construction services
The case involved the appellant engaged in renting out immovable property and developing industrial parks. The Commissioner issued show-cause notices proposing to deny CENVAT credit and demand service tax for a specific period. The appellant availed CENVAT credit on construction, which was contested. The appellant's counsel categorized the denial of credit into different periods and argued against the denial post a certain date based on relevant circulars and legal precedents. The appellant's utilization of CENVAT credit for output services was a key point of contention, with arguments supported by case law and tribunal decisions.

Issue 2: Service Tax on electricity charges
The appellant's counsel contested the demand for service tax on electricity charges, arguing that electricity should be considered goods based on legal precedents. The counsel referred to specific cases where pre-deposit was waived, supporting the argument that electricity charges should not be subject to service tax. The issue of taxation on electricity charges was a significant point of dispute between the appellant and the respondent.

Issue 3: Service Tax on fit out charges
Regarding the demand for service tax on fit-out charges, the appellant's counsel did not raise serious objections for pre-deposit during the stay petition hearing. The issue of service tax on fit-out charges was briefly addressed compared to the detailed arguments presented for other issues. The appellant's stance on this issue was not as vigorously contested as the denial of CENVAT credit or taxation on electricity charges.

The judgment analyzed each issue thoroughly, considering arguments from both parties. The Tribunal found merit in some of the appellant's contentions, especially regarding the denial of CENVAT credit on renting immovable property and the classification of electricity as goods. The decision required the appellant to make a specific pre-deposit within a stipulated period, balancing the interests of both parties. The judgment provided a detailed examination of the legal and factual aspects of the case, ensuring a fair and reasoned outcome.