2023 (11) TMI 892 - AT - Service Tax

CENVAT Credit - input service - construction services availed for construction of commercial complex, for earning rent - levy of service tax - electricity and water charges recovered from the tenants by way of reimbursement on actual basis - invocation of extended period of limitation. CENVAT Credit - HELD THAT - The same has been held to be eligible input service for the period prior to 01.04.2011 in the recent judgement of this Tribunal in L T Infocity and K. Raheja - Similar view was also taken by Hon ble Andhra Pradesh High court in COMMR. OF C. EX., VISAKHAPATNAM-II VERSUS SAI SAHMITA STORAGES (P) LTD. 2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT and by Division Bench of this Tribunal in OBEROI MALL LTD. VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI -II 2016 (3) TMI 854 - CESTAT MUMBAI . Accordingly the Appellant is entitled to the Cenvat Credit on receipt of input services under dispute. Levy of service tax on reimbursement of electricity and water charges - HELD THAT - This very Bench have held that no service tax is chargeable on the amount of recovery of water and electric charges on actual basis, in the appeals of L T Infocity and K. Raheja. Similar view was also taken by co-ordinate Bench at Allahabad in M/S LOGIX SOFT TEL PVT. LTD., M/S IT ENFRA SERVICES PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NOIDA-I, COMMISSIONER OF SERVICE TAX, NOIDA 2018 (4) TMI 1503 - CESTAT ALLAHABAD . Accordingly, following the precedents, the demand on this score also set aside. Extended period of limitation - HELD THAT - No case for invocation of extended period is made out. Accordingly, the show cause notice is held to be bad on this score also. The impugned order set aside - appeal allowed.

Summary

Issues involved:
1. Input service credit on construction service availed for commercial complex construction.
2. Service tax demand on electricity and water charges recovered from tenants.

Issue 1: Input service credit on construction service:
The Appellant, engaged in renting commercial space, availed Cenvat Credit for construction services used to construct a commercial building. Revenue objected to the credit based on Circulars stating immovable property is not subject to service tax. The Appellant reversed the credit but later contested the denial. The Appellant argued that construction service was included in the definition of input service pre-April 2011. Circulars supported treating construction services as input service. The Tribunal held in favor of the Appellant, citing precedents and rules, allowing the Cenvat Credit on construction services.

Issue 2: Service tax on electricity and water charges:
The Appellant collected reimbursement for electricity and water charges from tenants based on actual usage. Revenue demanded service tax on these charges under 'management & repair service'. The Appellant argued that the charges were reimbursements and not consumed in rendering output service. They cited legal judgments against the applicability of Rule 5 of Service Tax Rules. The Tribunal, following precedents, ruled in favor of the Appellant, setting aside the demand on electricity and water charges.

Conclusion:
The Tribunal allowed the appeal, granting the Appellant the Cenvat Credit on construction services and setting aside the demand for service tax on electricity and water charges. The show cause notice was deemed invalid, and the Appellant was entitled to consequential benefits as per the law.