2018 (11) TMI 835 - AT - Service Tax

CENVAT Credit - input services while constructing an IT park - Held that - Appellant is rendering taxable output service in the form of renting of immovable property services and the facility was created by utilizing various services rendered by service providers and also various other services. Similar issue came up before the Tribunal in the case of Mundra Ports and Special Economic Zone Ltd Vs CCE & C 2015 (5) TMI 663 - GUJARAT HIGH COURT , where it was held that any input services used for erecting facility, service tax credit cannot be denied on such input services. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of Cenvat Credit on input services for constructing an IT park and subsequent renting out of premises.
2. Denial of Cenvat Credit by the department based on Circular No.98/1/2008-ST.
3. Allegation of availing Cenvat Credit for services rendered prior to registration of output services.
4. Dispute over the denial of Cenvat Credit on various services utilized for creating a facility for renting of immovable property.

Issue 1: Availment of Cenvat Credit on input services for constructing an IT park and subsequent renting out of premises:
The appellant availed Cenvat Credit on input services utilized for constructing an IT park and later renting out the premises to IT companies. The department contested this claiming denial of Cenvat Credit as the services were related to the construction of an immovable property. The appellant argued that they are eligible for Cenvat Credit as they rendered taxable output services by renting out the property, for which input services were essential. The adjudicating authority rejected the appellant's contentions, leading to demands, interest, and penalties.

Issue 2: Denial of Cenvat Credit based on Circular No.98/1/2008-ST:
The department relied on Circular No.98/1/2008-ST to contest the appellant's claim for Cenvat Credit on input services. The lower authorities followed this circular, emphasizing that Cenvat Credit was availed on inputs and not input services, as seen in a previous case. However, the appellant argued that the circular did not apply to their situation as they were providing taxable output services through renting immovable property.

Issue 3: Allegation of availing Cenvat Credit for services rendered prior to registration of output services:
One of the issues raised was the allegation that the appellant availed Cenvat Credit for services rendered before registering their output services with the authorities. The appellant cited legal precedents, such as Vamona Developers Pvt Ltd case, to support their position that service tax credit cannot be denied solely based on the timing of registration relative to service receipt.

Issue 4: Dispute over the denial of Cenvat Credit on various services utilized for creating a facility for renting of immovable property:
The Tribunal examined the denial of Cenvat Credit on multiple services crucial for establishing a facility for renting immovable property. Citing previous cases and legal interpretations, the Tribunal emphasized the importance of input services in providing output services. The Tribunal's decision aligned with the view that service tax credit should not be denied for input services used in erecting facilities for taxable output services.

In conclusion, the Tribunal found in favor of the appellant, holding that the impugned orders were unsustainable. The appeals were allowed, setting aside the earlier decisions and providing consequential relief to the appellants. The judgment highlighted the significance of input services in enabling the provision of taxable output services, emphasizing the applicability of legal precedents in similar cases.