2016 (11) TMI 587 - AT - Service Tax

CENVAT credit - renting of immovable property - rule 2(1) of the CCR 2004 - CBEC circular 98/1/2008-ST dated 04.01.2008 - Whether the cenvat credit on construction services is available to the appellant or not? - Held that - reliance placed in the decision of the case COMMR. OF C. EX. VISAKHAPATNAM-II Versus SAI SAHMITA STORAGES (P) LTD. 2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT where it was held that unless excluded ail goods used in relation to manufacture of final product or for any other purpose used by a provider of taxable service for providing an output service are eligible for CENVAT credit - assessee used cement and TMT bar for providing storage facility without which storage and warehousing services could not have been provided - the appellant has correctly taken the cenvat credit to the tune of 20, 84, 900/- on construction services. Accordingly the same is allowed. Imposition of penalty - Held that - During the period April 2009 to March 2010 there was a stay on the levy of service tax under the category of renting of immovable properties services which is ultimately paid by the appellant alongwith interest. Further the issue is pending before the Hon ble Apex Court. In that circumstance I hold that no penalty is imposable on the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availability of cenvat credit on construction services.
2. Imposition of penalty on the appellant from April 2009 to March 2010.

Analysis:
(A) Availability of cenvat credit on construction services:
The appellant appealed against a service tax demand for denial of cenvat credit on input services used for constructing a factory, later rented out. The Revenue contended that the input services availed were not eligible as per CCR, 2004 and CBEC circular. The appellant argued that they were entitled to cenvat credit based on previous tribunal decisions and a stay on service tax demand. The Tribunal analyzed the definition of "input service" under Cenvat Credit Rules, emphasizing that services used for setting up premises of output service provider are admissible. It cited precedents where cenvat credit was allowed for construction-related services used for providing output services. The Tribunal concluded that the appellant rightly claimed cenvat credit on construction services, overturning the impugned order.

(B) Imposition of penalty from April 2009 to March 2010:
Regarding the penalty imposition for the period in question, the Tribunal noted a stay on service tax levy for renting of immovable properties services during April 2009 to March 2010, which the appellant later paid along with interest. The issue was pending before the Apex Court. Considering the circumstances and absence of penalty grounds, the Tribunal ruled that no penalty was applicable to the appellant. Consequently, the appeal was allowed, providing relief to the appellant.

In conclusion, the Tribunal upheld the appellant's right to cenvat credit on construction services and ruled out the imposition of penalties for the specified period due to the stay on service tax levy and pending legal proceedings. The decision was based on a detailed analysis of relevant legal provisions, precedents, and the specific circumstances of the case, ensuring a fair and just outcome for the appellant.