2019 (11) TMI 181 - AT - Service Tax

CENVAT Credit - construction of residential complex services - Revenue by entertaining a view that after the completion certificate, no service was being provided by the appellant attracting any payment of service tax, they are required to reverse the proportionate credit involved in the subsequent sale purchase of the flats - HELD THAT - Identical issue decided in the case of M/S ALEMBIC LTD. AND SHRENO LTD. VERSUS C.C.E. S.T. VADODARA-I 2018 (10) TMI 1557 - CESTAT AHMEDABAD where it was held that the appellant was not required to avail the cenvat credit on the input service, if any, received after obtaining the completion certificate. In the present case, the appellant have either not availed the cenvat credit in respect of the services received after obtaining the completion certificate in respect of exempted service or availed proportionate credit attributed to the taxable output service. For this reason also Rule 6 has no application for the period after obtaining the completion Certificate. The provisions of Rule 6 wherein an explanation was added it explaining that the exempted services would also include an activity, which is not a service as defined in Section 65B (44) of the Finance Act, 1994 - Inasmuch as the period involved in the present is appeal prior to introduction of the said explanation, it has to be held that there was no obligation on the part of the assessee to reverse any credit subsequent to the issuance of the completion certificate. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant is liable to reverse the CENVAT credit availed on input services after selling residential flats post obtaining completion certificate.

Analysis:
1. The appellant, a provider of construction services for residential complexes, utilized CENVAT credit of service tax paid on input services for paying service tax on the output service of residential complex construction. Upon selling certain flats post receipt of completion certificate, the revenue contended that no service was being provided post-completion certificate, necessitating the reversal of proportionate credit involved in subsequent flat sales. The appellant received a show cause notice to reverse credit amounting to ?24,31,231 availed from April 2013 to December 2015, leading to the impugned orders before the Tribunal.

2. The Tribunal, referencing a similar case, held that the appellant was entitled to avail credit immediately upon receiving bills/challans of input services, as per Rule 4(7) of Cenvat Credit Rules, 2004. The Tribunal clarified that no obligation existed for the appellant to reverse credit post obtaining the completion certificate, as the part of the service was exempted only after certificate issuance. The Tribunal's decision was upheld by the High Court of Gujarat, emphasizing that the explanation in Rule 6 regarding exempted services applied prospectively from its introduction date, absolving the appellant from reversing any credit post-completion certificate issuance.

3. Considering the above, the Tribunal set aside the impugned order, allowing the appeal with consequential relief. The judgment clarified that no obligation existed for the appellant to reverse any credit post obtaining the completion certificate, as the relevant provisions of Rule 6 applied prospectively from their introduction date, absolving the appellant from any liability in this regard.