2020 (4) TMI 275 - AT - Service Tax

CENVAT Credit - input services - output service of renting of immovable property service - period of dispute in the first show cause notice dated 15 March, 2012 is from 1 April, 2007 to 31 March, 2010, and from 1 April 2011 to 31 March, 2012 in the second show cause notice dated 16 April, 2013. Whether the amendment made with effect from 1 April, 2011 in the definition of input service will be applicable to the facts of the present case since the period of dispute in the second show cause notice is from 1 April, 2011 to 31 March, 2012? HELD THAT - The second show cause notice dated 16 April, 2013 makes no mention of the amendment made in the definition of input service , much less mentioning that the input services have been received by the appellant after 1 April, 2011. In reply to the show cause notice, the appellant stated that in view of the clarification dated 29 April, 2011 issued by CBEC, input services received prior to 1 April, 2011 were admissible for CENVAT Credit. It has also been stated that the input services in question were received by the appellant before 1 April, 2011 in the grounds of appeal also. The appellant has specifically come out with a case that the CENVAT Credit availed by the appellant for the period 2011-12 pertains to input services received by the appellant prior to 1 April, 2011. In this connection, the relevant pages of the CENVAT Register for the period 2011-12 have also been enclosed - The Commissioner has not examined this aspect and has merely observed that in view of the amendment made in the definition of input service with effect from 1 April, 2011, the appellant would not be entitled to avail CENVAT Credit. It clearly transpires from the reply filed by the appellant as also from the documents enclosed in the appeal that even though the period in dispute may be from 1 April, 2011 to 31 March, 2012, but the input services were received by the appellant prior to 1 April, 2011. The clarification contained in the Circular dated 29 April, 2011, on which reliance has been placed states that The credit on such service shall be available if its provision had been completed before 01.04.2011. Thus, CENVAT Credit could not have been denied to the appellant for this reason - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Admissibility of CENVAT Credit on inputs, input services, and capital goods used in the construction of a commercial Mall for providing the output service of renting of immovable property (RIP).
2. Applicability of the amendment made in the definition of "input" and "input services" effective from 1 April 2011 to the present case.

Issue-wise Detailed Analysis:

1. Admissibility of CENVAT Credit on Inputs, Input Services, and Capital Goods:

The appellant constructed a commercial Mall and rented out the space for commercial purposes, which falls under the RIP service as defined under section 65 (19a) of the Finance Act, 1994. The appellant paid service tax on the RIP service and availed CENVAT Credit on inputs, input services, and capital goods used in the construction of the Mall.

The Commissioner, in the order dated 1 April 2014, held that the CENVAT Credit availed for the construction of the Mall was inadmissible. The Commissioner concluded that since immovable property is neither a service nor goods, input credit cannot be taken against immovable property. The Commissioner stated, "The immovable property for which the noticee have availed CENVAT Credit is neither a 'service' nor 'goods'. The activity of construction of the building is independent from the activity of 'Renting out the said premises'. Therefore, the duties paid on the inputs, capital goods, input services used in the construction of the building cannot be accumulated and used in discharging the service tax liability on the renting of immovable property services by the noticee."

The appellant argued that the inputs, input services, and capital goods used for the construction of the Mall have a direct nexus with the provision of the RIP service. They relied on several judgments, including the Andhra Pradesh High Court in Commissioner of Central Excise, Vishakhapatnam-II vs. Sai Sahmita Storages (P) Ltd., the Madras High Court in Commissioner of GST & Central Excise, Chennai-40 vs. M/s. Dymos India Automotive Pvt. Ltd., and the Delhi High Court in Vodafone Mobile Services Ltd. vs. Commissioner of Service Tax, Delhi.

The Tribunal considered these arguments and noted that the issue of CENVAT Credit availed for the construction of a Mall and subsequent renting has been addressed by various High Courts and the Tribunal. The Madras High Court in Dymos India Automotive held that "construction service is an eligible service for credit for providing output service of renting of immovable property and without construction of the building, the renting of immovable property cannot be provided."

The Tribunal concluded that CENVAT Credit availed by the appellant on inputs, input services, and capital goods used for the construction of the Mall, which was ultimately let out, could not have been denied. The findings of the Commissioner were set aside.

2. Applicability of the Amendment in the Definition of "Input" and "Input Services":

The second show cause notice covered the period from 1 April 2011 to 31 March 2012. The Commissioner noted the amendment made by Notification dated 1 March 2011, effective from 1 April 2011, in the definition of "input" and "input services" and concluded that the appellant would not be entitled to claim CENVAT Credit for this period.

The appellant argued that the services were received before 1 April 2011, and therefore, the amendment would not apply. They relied on a Circular dated 29 April 2011 issued by the Central Board of Excise and Customs (CBEC), which clarified that CENVAT Credit on input services would be available if the service had been provided before 1 April 2011.

The Tribunal noted that the second show cause notice did not mention the amendment made in the definition of 'input service' or that the 'input services' were received after 1 April 2011. The appellant provided evidence that the 'input services' in question were received before 1 April 2011.

The Tribunal concluded that CENVAT Credit could not have been denied to the appellant based on the amendment effective from 1 April 2011, as the services were received prior to this date.

Conclusion:

The Tribunal set aside the impugned order dated 1 April 2014 and allowed the appeal, stating that CENVAT Credit availed by the appellant on inputs, input services, and capital goods used for the construction of the Mall, which was subsequently let out, could not have been denied. The amendment effective from 1 April 2011 did not apply to services received before this date.

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