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TMI Blog2019 (7) TMI 908X X X X Extracts X X X X X X X X Extracts X X X X ..... prima facie, such situation was not to be treated as exempted service and did not attract the mischief created under rule 6 of the Rules. Therefore, for the period prior to 13.4.2016, the situation would be governed by rule 3 of the Rules for availing Cenvat Credit till such time i.e. till the time rule 6 was specifically made applicable by virtue of the deeming fiction created. As per rule 3 of the Rules, Cenvat credit of service tax paid on input services used to provide output service, is eligible. In the facts of present case, it is evident that the respondent has started taking only proportionate credit after receipt of completion certificate which was after due intimation to the revenue department and also certified by independent CA. Therefore, rule 6 of the Rules in toto cannot apply prior to 13.4.2016 to the facts of the case since sale of immovable property is not exempt service at all. Thus, in the light of the provisions of Rule 3 of the Rules, respondent cannot avail full Cenvat credit on input services received after obtaining completion certificate. Hence, the respondent cannot be expected to pay an amount equal to 8%/10% of sale price of immovable property after obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iding taxable service and exempted service, and the procedures to be followed under the provisions of Rule 6(3) of the CCR, 2004 when failed to maintain separate records for taxable and exempted services and also not taken into cognizance the Rule 2(1) of Cenvat Credit Rules 2004 pertains to "input service". 2. The respondent was engaged in providing taxable services within the meaning of the Finance Act, 1994 including construction of residential complex, commercial or industrial complex, special services provided by builders, renting of immovable property, maintenance and repair services, business support services, etc. The respondent was registered with Service tax department and also availing the facility of Cenvat credit as per Cenvat Credit Rules, 2004 ("the Rules" for short). 3. The respondent had paid service tax under works contract service category for the residential units sold to various customers from time to time. On 24.7.2014, the residential project of the respondent was awarded completion certificate and as on date of obtaining such completion certificate, approximately 32% of the residential apartments remained unsold for which no bookings were made. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and under rule 6 of the Rules as well as rejection of the refund claim by the revenue authorities preferred appeal before the Customs, Excise & Service Tax Appellate Tribunal, West Zone, Ahmedabad (hereinafter referred to as the Tribunal"). The Tribunal allowed the appeal of the respondent. 8. Learned Advocate for the appellant submitted that the Tribunal has committed an error in holding that the respondent was justified in availing only proportionate Cenvat Credit considering square foot area where service tax was paid and balance area where service tax will not be paid after completion certificate contrary to Rule 6(2) and 6(3) of the Rules. It was submitted that after holding that after receiving completion certificate the output activity was 'nonservice' as per provisions of section 65B of the Finance Act,1994 read with definition of term 'exempted service under Rule 2(e) of the Rules, the Tribunal has erred in allowing the availment of Cenvat Credit to the respondent on proportionate basis. It was further submitted that the Tribunal has not considered the provisions of Rule 6(1) of the Rules on admissibility of Cenvat Credit read with Rule 6(3) of the Rules regarding mainte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 010 till receipt of completion certificate, based on CERA audit objection wherein such credit was sought to be reversed based on considering square foot area where Service Tax was paid and balance area where Service Tax will not be paid after Completion Certificate." 10. The Tribunal after considering the facts of the case and relevant provisions of the Act arrived at following conclusion: "a. For the above reasons, the Appellants are not liable to pay 8%/10% amount of value of service became exempted after receipt of completion certificate under Rule 6 of the CCR. b. The Cenvat Credit on input services received after obtaining Completion Certificate cannot be wholly allowed to the Appellant, and since they had availed only proportionate credit by maintaining separate accounts, the same is therefore sufficient compliance of the legal obligation cast upon them. c. The Appellants can be said to have "maintained proper separate accounts" as required under Rule 6 of the CCR, 04, having availed credit only to the extent input services in taxable activity, on the scientific basis after obtaining Completion Certificate. d. The Appellants are not required to reverse Cenvat Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpted goods or for provision of exempted services or input service as is used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services and the credit not allowed shall be calculated and paid by the manufacturer or the provider of output service, in terms of the provisions of subrule (2) or subrule (3), as the case may be : Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule. Explanation 1.For the purposes of this rule, exempted goods or final products as defined in clauses (d) and (h) of rule 2 shall include nonexcisable goods cleared for a consideration from the factory. Explanation 2,Value of nonexcisable goods for the purposes of this rule, shall be the invoice value and where such invoice value is not available, such value shall be determined by using reasonable means consistent with the principles of valuation contained in the Excise Act and the rules made thereunder. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , since it can be said to have maintained separate accounts as required under rule 6(2) of the Rules. As respondent has taken only proportionate credit on input services after receipt of completion certificate, duly backed by CA certificate and certified work sheets for the proportionate credits availed after completion certificate, it has fulfilled its obligation under Rule 3 of the Rules read with Rule 6 thereof and therefore, no liability to pay any amount equal to 8%/10% of the sale price of immovable property can be fastened after receipt of completion certificate under Rule 6 of the Rules. While the law does not intend to allow any undue benefit to a service provider in terms of Cenvat credit of service tax paid on input services used in providing nontaxable output activity, however, once it is legally and validly availed, the same cannot be denied and/or recovered unless specific provisions exist for the same and credit entitlement is on the date of receipt of inputs when the output activity was wholly dutiable and merely because the finished goods eventually became exempt later on, the credit availed on inputs which were contained in semifinished/ finished goods state was h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded, when he opts for exemption from payment of whole of the service tax leviable on such taxable service under a notification issued under Section 93 of the Finance Act, 1994(32 of 1994) and after directing the said amount from the balance of CENVAT credit, if any, lying in his credit, the balance, if any, still remaining shall lapse and shall not be allowed to be utilized for payment of duty on any excisable goods, whether cleared for home consumption or for export or for payment of service tax on any other output service, whether provided in India or exported." 17. From the above subrule (4), it is clear that even if an output service provider avails the credit and output service becomes exempted in such case the credit only in respect of inputs lying in stock or is contained in taxable service is required to be paid whereas there is no provision for payment of Cenvat credit equivalent to the input services used in respect of exempted service. Therefore, Cenvat credit availed in respect of input service is not required to be paid back under any circumstances and therefore, the respondent was not legally required to reverse any credit which was availed by them during the period ..... X X X X Extracts X X X X X X X X Extracts X X X X
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