2024 (9) TMI 1318 - HC - Service Tax

Denial of CENVAT credit - rent of building taken by the appellant for the purposes of its job workers - taxability of service under renting out immovable property services - HELD THAT - It is an admitted position that the manufacturer-appellant had shifted his machinery to the rented premises. The raw material was also provided by the appellant. The contract was entered into between the appellant and the job workers to perform the job of manufacturing additionally at the rented premises and handover the final product to the appellant. The premises were thus made available to the job workers for the purpose of performing their work and therefore, the necessary ingredients as required for taxable service would be fulfilled namely that the service has been provided by the job workers in the rented immovable property and secondly the rented immovable property was being utilized for the furtherance of business or commerce by the manufacturer appellant. It is found that none of the authorities below examined this aspect while deciding the case and both the appellate authorities proceeded on examining the case in light of the definition of job workers. A perversity has crept in the order as the claim of Cenvat credit is not for the job workers and payment made was for the rent paid for the premises. In the circumstances, it is not found that the orders impugned to be sustainable in the eyes of law and the same are accordingly set aside. The order dated 28.04.2014, passed by the Customs, Excise and Service Tax Appellate Tribunal is set aside - the appellant entitled for the benefit of Cenvat credit as claimed - appeal allowed.

Summary

Issues:
1. Denial of Cenvat credit for rent of building taken by appellant for job workers.
2. Interpretation of taxable service under renting out immovable property services.
3. Application of input service definition in relation to Cenvat credit.

Detailed Analysis:
1. The appellant challenged the Customs, Excise and Service Tax Appellate Tribunal's order partially dismissing their appeal regarding the denial of Cenvat credit for the rent of a building used by job workers. The appellant argued that the authorities failed to consider that the agreement with the job workers was distinct from the claim for Cenvat credit for renting out immovable property services.

2. The respondent contended that the job workers' agreement indicated their independence from the manufacturer, suggesting that the rent paid by the appellant for the premises would not qualify for Cenvat credit. The court examined the definition of taxable service under renting out immovable property services to determine the eligibility for Cenvat credit.

3. The court highlighted the definition of taxable service related to renting immovable property, emphasizing that to claim Cenvat credit for rent, the services provided in the rented premises must be in connection with renting immovable property and used for business purposes. The court found that the rented premises were utilized for manufacturing by job workers under the manufacturer's supervision, meeting the criteria for Cenvat credit.

4. The court noted that the lower authorities failed to consider this crucial aspect and erroneously focused on the job workers' definition. The court deemed the denial of Cenvat credit for rent payment unjustified as it was not for the job workers but for the premises. Consequently, the court set aside the impugned orders as unsustainable in law and allowed the appeal, granting the appellant the Cenvat credit benefit for the rent paid.

5. The court upheld the rest of the Customs, Excise and Service Tax Appellate Tribunal's order, with all pending applications disposed of accordingly. The judgment clarified the application of input service definition in the context of Cenvat credit eligibility, emphasizing the importance of considering the specific nature of services provided in rented premises for claiming such credit.