2018 (7) TMI 338 - AT - Service Tax

CENVAT credit - input services - Commercial or Industrial Construction Services - Work Contract Services - whether the availment of credit post 1st April 2011 against the input services which where received prior 1st April, 2011 will be hit by the amendment in input service definition w.e.f. 1st April 2011 or not? Held that - With effect from 1st April, 2011 the definition of input services has been redefined and the services received in construction of a building or a civil structure or a part thereof has been specifically excluded from the category of the input service. The peculiar fact of the present case is that the input services were received in the year 2005 - the appellant has rightly availed the credit on construction activity being done by the appellant prior the amendment in the definition of input service. Also the said amendment cannot be made applicable retrospectively. Extended period of limitation - Held that - It was for the first time in 2014 that a fixed limit of 6 months was introduced which has now been enhanced to one year for availing the credit of input services. The said amendment/ incorporation in Cenvat Credit Rules also cannot take a retrospective effect. In the absence of any fixed time limit, the availment of Cenvat Credit on permissible input services cannot be held beyond limitation (the construction services being permissible input prior 1.04.2011). The impugned order has wrongly confirmed the demand holding the impugned service to be excluded by virtue of amendment of 1st April 2011 and by ignoring the fact that the cenvat credit as has been availed by the appellant had accrued to him much prior the said date i.e. 1st April 2011 - appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to Commissioner's order regarding availing Cenvat credit on input services pre and post amendment of definition.

Analysis:
The appellant challenged the Commissioner's order dated 15th December, 2017, alleging that they availed Cenvat credit on input services for construction activities, which the Department disallowed post an amendment in the definition of input services effective from 1st April, 2011. A show cause notice was issued in 2012, confirmed by the Joint Commissioner in 2017, and upheld by the Commissioner (Appeals), leading to the present appeal.

The appellant argued that despite the credit being availed in 2012, the expenses for input services were incurred in 2005-06, making the amendment inapplicable. The Department contended that the delay in availing credit after more than 5 years rendered the challenge baseless. The Tribunal noted that the input services for which credit was availed in 2011 were received in 2005-06, pre-amendment.

The crucial issue was whether availing credit post the 2011 amendment for services received pre-amendment was permissible. The Tribunal referred to a Mumbai Tribunal case, stating that such credit could be allowed for services received before the amendment excluding construction services. The Tribunal held that the appellant rightly availed credit for construction activities pre-amendment, as the amendment couldn't be applied retrospectively.

Regarding the Department's argument on limitation for availing credit, the Tribunal noted that prior to 2014, no fixed time limit existed. The introduction of a 6-month limit in 2014, later extended to one year, couldn't have a retrospective effect. Since the Department didn't raise this issue earlier, the Tribunal found the challenge unsustainable.

Conclusively, the Tribunal set aside the impugned order, stating that the credit accrued to the appellant before the 2011 amendment, making the denial of credit erroneous. The appeal was allowed, emphasizing that the credit for permissible input services couldn't be held beyond limitation due to the absence of a fixed time limit pre-2014.