2016 (2) TMI 443 - AT - Service Tax

Cenvat Credit - eligibility of input services, inputs and capital goods availed for the purpose of construction of immovable property - output service of renting of immovable property - Held that - applicant has made out a strong case for full waiver of pre-deposit of the confirmed demand alongwith penalties. - Stay granted.

Summary

Issues:
1. Eligibility of cenvat credit on input services, inputs, and capital goods for providing renting of immovable property service.

Analysis:
The judgment revolves around the issue of whether the applicant is entitled to cenvat credit on input services, inputs, and capital goods used for providing the service of renting immovable property. The Commissioner's order-in-original denied the credit on the grounds that the items were used for the construction of immovable property, which was deemed ineligible for credit. The applicant contended that the inputs had a direct nexus to their output service and fell under the "means" clause, making them eligible for credit. The applicant cited precedents like Galaxy Mercantiles Ltd. and Gujarat High Court decisions to support their claim.

The Assistant Commissioner, on the other hand, supported the original authority's findings, arguing that the inputs were used for creating capital assets, not for providing the output service of renting immovable property. He referenced the decision of the Bombay High Court in Bharti Airtel Ltd. to strengthen his argument. The Assistant Commissioner also tried to distinguish the Gujarat High Court decision in Mundra Port, stating that it did not affect the applicability of the Bharti Airtel case.

Upon hearing both sides, the Tribunal found that the applicant had a strong case for a full waiver of pre-deposit of the tax amount and penalties. The Tribunal disagreed with the Commissioner's reasoning based on the category of output service and the distinction made regarding the applicability of the Mundra Ports case. The Tribunal noted that the Gujarat High Court had allowed input credit on items used in the construction of a jetty, indicating that such credits were available for providers of various output services. Consequently, the Tribunal ruled in favor of the applicant, ordering the waiver of service tax and penalties, with the recovery of the amount stayed pending the appeal's disposal.