2023 (3) TMI 801 - AT - Service Tax

Cenvat Credit - Providing output service of renting of immovable property - credit of service tax / duty paid on construction services - Appellant utilized credit while discharging the Service Tax liability on the leasing of the property - extended period of limitation - HELD THAT - It is seen that the appellant has taken Cenvat Credit of Rs.2,29,99,232/- during the period under consideration. When they are not eligible for Cenvat Credit on account of constructed property which is sold, they have been regularly reversing the Cenvat Credit. These facts are being regularly disclosed in the ST-3 Returns as well as in the accompanying letter submitted to the Range/Division officials. In respect of the constructed portion which is leased out by them, there is no dispute that the Service Tax is being paid on the lease amount received by them. It is seen that on similar/identical issues the Tribunals and High Courts have been consistently holding that the inputs used for construction of immovable property is eligible for Cenvat Credit when the Service Tax is paid on the service provided - Hon ble Ahemdabad Tribunal in the case of Navratna S G Highway Prop. Pvt. Ltd. Vs. CST, Ahmedabad 2012 (7) TMI 316 - CESTAT, AHMEDABAD has held that without utilizing the service, mall could not have been constructed and therefore the renting of immovable property would not have been possible. Extended period of limitation - HELD THAT - As per the factual evidence reproduced by the appellant in the form of ST-Returns and letters filed with the Department from time to time with regard to the Cenvat Credit taken and reversed by them in the course of their business, the Department has not made out any case against the appellant towards suppression - the demand for the extended period is required to be set aside in the present case also on account of time bar. Appeal allowed.

Summary

Issues:
1. Eligibility for Cenvat Credit on construction of commercial properties.
2. Reversal of Cenvat Credit on sold units.
3. Applicability of case laws on Cenvat Credit eligibility.
4. Limitation on demand for extended period.

Analysis:

Issue 1: Eligibility for Cenvat Credit on construction of commercial properties
The appellant, engaged in construction, availed Cenvat Credit on inputs for construction. Upon selling constructed units, they reversed proportionate Cenvat Credit. The Department demanded reversal of a specific amount, which the appellant contested. The appellant argued that they are eligible for Cenvat Credit as inputs were used for providing services, citing case laws supporting their claim. The Tribunal noted the regular disclosure of details in ST-3 Returns and accompanying letters, indicating no suppression of facts. The lower Authorities confirmed the demand, but the Tribunal found in favor of the appellant based on consistent disclosures and legal precedents.

Issue 2: Reversal of Cenvat Credit on sold units
The appellant reversed Cenvat Credit on units sold, ensuring compliance with tax liabilities. The Department issued a Show Cause Notice for reversal of a specific amount, leading to the appeal. The appellant maintained that they had appropriately reversed the credit and utilized the remaining credit for tax obligations on leased properties. The Tribunal acknowledged the appellant's actions and upheld their compliance with tax regulations.

Issue 3: Applicability of case laws on Cenvat Credit eligibility
The appellant relied on various case laws to support their claim for Cenvat Credit eligibility on construction inputs. The Tribunal examined the cited cases, including decisions by different Tribunals and High Courts, to establish the consistent interpretation that construction inputs qualify for Cenvat Credit when used for providing taxable services. The Tribunal found the appellant's case aligned with the legal precedents, reinforcing their eligibility for the credit.

Issue 4: Limitation on demand for extended period
Regarding the demand for an extended period, the appellant argued that they regularly filed ST-3 Returns disclosing all relevant details, negating any suppression of facts. Citing a previous Tribunal decision, the appellant contended that when facts are properly disclosed, demands for extended periods are not legally sustainable. The Tribunal agreed with the appellant, setting aside the demand for the extended period due to time limitations and lack of evidence supporting suppression.

In conclusion, the Tribunal allowed the appeal, granting consequential relief to the Appellant based on the detailed analysis of the issues involved and the legal principles governing Cenvat Credit eligibility and compliance with tax obligations.