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2018 (11) TMI 1227 - AT - Service TaxCENVAT Credit - construction of the Hotels - denial of credit on the ground that provision of services through the said Hotel was not possible till such time the construction of Hotel was not completed - Held that - Hon ble Andhra Pradesh High Court has held in the case of M/s Sai Sahmita Storages Pvt. Ltd. 2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT that Cenvat credit availed during the construction is admissible for discharge of service tax liability after such constructed structure is used for providing taxable service - demand do not sustain. Penalty imposed under Rule 15A of Cenvat Credit Rules also not sustainable. It is establish in the show cause notice that the service tax under the category of Intellectual Property Service to the tune of ₹ 9,72,352/- was paid before the issuance of show cause notice and interest was also paid. We find that revenue has failed to identify whether the interest paid was sufficient or short and therefore the confirmation of demand with interest on the same and penalty of ₹ 10,000/- is not sustainable. Abatement on Short Terms Accommodation Service, Restaurant Service, Mandap Keeper Service also remains allowed. Appeal allowed - decided in favor of appellant.
Issues:
1. Admissibility of Cenvat credit for construction of hotel services. 2. Allegations regarding service tax availed during specific periods. 3. Admissibility of abatement under Notification No.01/2006-ST. 4. Demand for interest payment under Section 75 of the Finance Act, 1994. Analysis: Issue 1: Admissibility of Cenvat credit for construction of hotel services The appellants availed Cenvat credit during the construction period of the hotel, arguing that services could not be provided until the hotel was completed. The counsel referenced a ruling by the Andhra Pradesh High Court to support their claim. The Tribunal found the ruling applicable, holding that Cenvat credit availed during construction is admissible for discharging service tax liability after the structure is used for taxable services. Consequently, the demand for Cenvat credit amounting to ?31,83,075, along with interest and penalty, was deemed unsustainable. Issue 2: Allegations regarding service tax availed during specific periods The revenue alleged that the appellants availed service tax without providing output services during specific periods. The Tribunal noted that the service tax under Intellectual Property Service was paid before the show cause notice, but the revenue failed to determine if the interest paid was sufficient. As a result, the confirmation of demand with interest and penalty was deemed unsustainable. Issue 3: Admissibility of abatement under Notification No.01/2006-ST Regarding the abatement under Notification No.01/2006-ST, the Tribunal observed that the revenue did not provide evidence to establish that inputs, capital goods, and input services were used in providing specific services, making the allegations of inadmissible abatement unsustainable. Consequently, the demands and penalties related to abated values were set aside. Issue 4: Demand for interest payment under Section 75 of the Finance Act, 1994 The revenue pressed for interest payment on the confirmed service tax demand. However, the Tribunal found that the Original Authority's failure to direct the appellant to pay interest rendered the demand unsustainable. As a result, the appeal filed by the revenue was dismissed, and the impugned Order-in-Original was set aside. In conclusion, the Tribunal allowed the appeal filed by the appellant, setting aside the impugned Order-in-Original due to the unsustainable nature of the demands and penalties imposed. The decision was pronounced on 20/11/2018.
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