2019 (3) TMI 37 - AT - Service Tax

CENVAT Credit - construction of residential property - unsold flats at the time of receipt of completion certification - Held that - When the appellant availed the CENVAT credit on the input services, he was entitled to take the same and there was no provision in the CCR to reverse the same prior to 01.04.2016 and in the present case, the period covered is prior to the amendment in Rule 6(1) of CCR, 2004 - further, the services provided by the appellant during the relevant period up to the date of obtaining the OC would not qualify as exempted services and therefore, the provisions of Rule 6 will not be applicable. The issue is squarely covered in favour of the appellant by the decision of Division Bench, CESTAT, Ahmedabad in the case of M/s. Alembic 2018 (10) TMI 1557 - CESTAT AHMEDABAD wherein it has been held by the Division Bench after considering the CENVAT Credit Rules as well as the amendment in Rule 6 by adding Explanation w.e.f. 01.04.2016 that the Appellants were not legally required to reverse any Credit which was availed by them during the period 2010 till obtaining Completion Certificate, i.e. during the period when output service was wholly taxable in their hands, merely because later on, some portion of the property was converted into immovable property on account of receipt of Completion Certificate and on which no Service Tax would be paid in future. Impugned order not sustainable - further, the amount of ₹ 11,67,545/- paid by the appellant under protest the protest is vacated - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of CENVAT credit for construction of residential complex.
2. Reversal of CENVAT credit post receiving Occupancy Certificate.
3. Applicability of Rule 6 of CENVAT Credit Rules, 2004.
4. Interpretation of exempted services and taxable services.
5. Legal sustainability of impugned order.

Analysis:
1. The appellant, engaged in constructing a residential complex, availed CENVAT credit for all five flats, including those unsold post receiving the Occupancy Certificate. The Department alleged wrongful CENVAT credit availing, demanding reversal and imposing penalties. The Original Authority upheld the demand, leading to the appeal.
2. The appellant argued that it was impossible to predict unit sales pre/post Occupancy Certificate issuance, justifying the CENVAT credit availing. They contended that no provision mandated reversal pre-2016 amendment, citing absence of exempted services pre-Completion Certificate.
3. The Tribunal analyzed Rule 6 of CCR, noting the absence of a reversal mandate pre-2016. It referenced a precedent (M/s. Alembic Ltd. case) supporting CENVAT credit retention pre-Completion Certificate issuance, emphasizing legal entitlement to avail credits immediately upon service bill receipt.
4. The Tribunal differentiated between exempted and taxable services, asserting that the appellant's services were taxable pre-Completion Certificate, thus Rule 6 did not apply. It highlighted the absence of a provision mandating credit reversal for services turning exempt post-credit availing.
5. Ultimately, the Tribunal ruled in favor of the appellant, citing the M/s. Alembic Ltd. case as precedent. It set aside the impugned order, vacated the protest against the payment made, and allowed the appeal, emphasizing the legal entitlement to retain the availed CENVAT credit pre-Completion Certificate issuance.