2014 (2) TMI 708 - AT - Service Tax

Allowability of Cenvat credit Construction activity Nexus between Input and Output services Waiver of Pre-deposit Held that - The word used is used in the definition of inputs , capital goods and input service - The word is not used as past tense of use but as past participle which is an adjective to the words in question. In the case of capital goods normally the goods arrive much earlier than it is put to use and credit of duty paid is always allowed and there is no reason why a different interpretation should be adopted for input services - The decision in CCE, Visakhapatnam Vs. Sai Sahmita Storages (P) Ltd. 2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT followed - Input services can be allowed in such cases thus, prima facie the assessee is able to make out a case in their favour stay granted.

Summary

Issues:
1. Denial of CENVAT credit on input services used in construction activity.
2. Interpretation of the definition of input services under Rule 2(l) of the CENVAT Credit Rules, 2004.
3. Nexus between input services and output services.
4. Applicability of CENVAT credit for constructing an immovable property.
5. Appeal for waiver of pre-deposit of dues.

Analysis:
1. The applicant constructed a hotel and claimed CENVAT credit on input services used in the construction. The Revenue contended that since no output service was provided when the credit was taken, it was not allowable. A show-cause notice was issued, resulting in a confirmed amount against the applicant. The applicant appealed to the tribunal seeking waiver of pre-deposit for admission of the appeal.

2. The applicant argued that they were registered for service tax on various services and took credit for setting up facilities to provide output services like catering, mandap keeping, etc. The definition of input services at Rule 2(l) covered services for setting up premises of output service providers. The counsel urged that the appeal should be admitted without pre-deposit.

3. The Revenue opposed, stating that the definition required services to be "used" by a provider for providing output services, not merely intended for use. As no output service was provided when the credit was taken, the order was deemed legal. The argument emphasized that credit should be for taxable output services, not for immovable property like a hotel.

4. The tribunal analyzed the term "used" in the definition of input services, capital goods, and inputs. It clarified that "used" was a past participle, not strictly past tense, allowing for a broader interpretation. Referring to precedents, the tribunal noted that input services could be allowed even when an immovable property was created between input and output services.

5. Citing relevant case laws, the tribunal decided to waive the pre-deposit requirement for the appeal and ordered a stay on the collection of dues during the appeal's pendency. This decision was based on the interpretation of the term "used" in the context of input services and the nexus between input and output services established by legal precedents.