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2022 (5) TMI 569 - AT - Service TaxCENVAT Credit - providing renting services - inputs/capital goods/input services used for construction of buildings and structures, which are then used for providing services - case of Revenue is that the inputs, capital goods and input services which go into creation of such an immovable property does not qualify as input, capital goods service or input service under the CENVAT Credit Rules, 2004 - HELD THAT - This issue was addressed by various High Courts - In COMMR. OF C. EX., VISAKHAPATNAM-II VERSUS SAI SAHMITA STORAGES (P) LTD. 2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT , the High Court of Andhra Pradesh has decided that CENVAT credit is admissible on cement and TMT bars for construction of warehouses by M/s Sai Samhita who were providing storage and warehousing services. There are substance in the submission of the appellants on merits as it is undisputed that the appellants are engaged in providing renting of immovable property service and all the inputs, capital goods and input services which are in dispute were used for construction of buildings which were then rented out and service tax was paid on the renting of immovable property service. The only question which remains is whether, by virtue of the fact that the building which emerges is neither a good nor a service, the appellant can be denied CENVAT credit. The jurisdictional Delhi High Court in VODAFONE MOBILE SERVICES LIMITED, INDUS TOWERS LIMITED, TOWER VISION INDIA PRIVATE LIMITED, BHARTI INFRATEL LIMITED, VERSUS COMMISSIONER OF SERVICE TAX, DELHI 2018 (11) TMI 713 - DELHI HIGH COURT has held in favour of the appellant. The appellants are entitled to the disputed CENVAT credit. Consequently, the impugned orders seeking to deny and recover CENVAT credit along with interest and seeking to the impose penalties cannot be sustained - Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Denial of CENVAT credit on inputs, input services, and capital goods used for construction of buildings rented out by the appellants. 2. Interpretation of the term "input service" and its amendment. 3. Applicability of CENVAT credit rules to immovable property. 4. Invocation of the extended period of limitation for demand and penalties. Issue-wise Detailed Analysis: 1. Denial of CENVAT Credit on Inputs, Input Services, and Capital Goods: The core issue in both appeals was the denial of CENVAT credit on inputs, input services, and capital goods used for constructing buildings rented out by the appellants, on which service tax was paid under "Renting of Immovable Property Services." The appellants argued that they were eligible for CENVAT credit as these inputs and services were used in the construction of buildings from which taxable services were provided. The Revenue contended that the inputs and capital goods resulted in the creation of immovable property, which is neither goods nor services, thereby disqualifying them from CENVAT credit. 2. Interpretation of "Input Service" and its Amendment: The appellants argued that the definition of "input service" was amended by Notification No. 3/2011-CE(NT) dated 01.04.2011, specifically excluding services used for construction of a building from the ambit of "input services" eligible for CENVAT credit. They contended that the amendment was prospective and not retrospective, as clarified by CBEC Circular No. 943/04/2011-CX dated 29.04.2011. Since the period of dispute was from 01.04.2008 to 31.03.2011, the appellants claimed that CENVAT credit on input services used in construction was admissible. 3. Applicability of CENVAT Credit Rules to Immovable Property: The appellants argued that the emergence of an immovable structure at an intermediate stage should not be a ground to deny CENVAT credit, as the structure was used for providing taxable services. They cited various case laws, including Commissioner of Central Excise, Visakhapatnam-II vs. Sai Samhita Storages (P) Limited and Mundra Ports & Special Economic Zone Limited v. Commissioner of Central Excise & Customs, to support their claim that inputs and services used in the construction of buildings, which were then used for providing taxable services, were eligible for CENVAT credit. 4. Invocation of Extended Period of Limitation: The appellants argued that the extended period of limitation could not be invoked as there was no suppression of facts or willful misstatement. They contended that the entire demand was time-barred, and therefore, interest and penalties were not payable. Judgment: The Tribunal considered the submissions from both sides and perused the records. It noted that the short question was whether inputs, capital goods, and input services used for constructing buildings and structures, which were then used for providing services, were eligible for CENVAT credit. The Tribunal found that various High Courts, including the Andhra Pradesh High Court in Commissioner of Central Excise, Visakhapatnam vs. Sai Samhita Pvt Ltd., had allowed CENVAT credit on inputs used for constructing buildings used for providing taxable services. The Tribunal also noted that the Delhi High Court, the jurisdictional High Court for this Bench, had held in Vodafone Mobile Services Limited vs. Commissioner of Service Tax, Delhi that CENVAT credit was admissible on inputs and input services used for constructing towers. As there was no stay on this decision by the Supreme Court, the Tribunal was bound by the Delhi High Court's judgment. The Tribunal concluded that the appellants were entitled to the disputed CENVAT credit as they were engaged in providing renting of immovable property service, and all the inputs, capital goods, and input services in dispute were used for constructing buildings rented out, with service tax paid on the renting of immovable property service. Consequently, the impugned orders seeking to deny and recover CENVAT credit along with interest and penalties were set aside, and the appeals were allowed with consequential relief to the appellants.
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