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TMI Blog2024 (9) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... old earlier and reverse the balance amount towards the unsold four flats. As per rule 3 of the CCR 2004, Cenvat credit of service tax is paid on input services used to provide output service is eligible. A service provider is entitled to credit of excise duty paid on inputs and capital goods and service tax paid on input services used by him for providing the output service. Thus availment of cenvat credit has direct nexus to the payment of taxes. The very fact that the appellant has no liability to discharge the service tax they are not eligible to retain the amount availed by them towards the Cenvat credit. The Chandigarh Bench of the Tribunal in M/s Woodward Governor India Ltd [ 2023 (5) TMI 564 - CESTAT CHANDIGARH ], where the appellant was engaged in manufacture and trading of goods and was availing credit of the duties and taxes paid on the inputs and input services, following the decision of the Tribunal in Lally Automobiles Ltd. [ 2018 (7) TMI 1679 - DELHI HIGH COURT ] held that the appellants have no reason to avail credit on services which they were fully aware were exempted services and that the provisions of Rule 6(3) will not apply, held that appellants ought to have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived ₹37,20,967/- during the period from 2014 15 to June 2017, on which service tax amounting to ₹4,66,538/- was not deposited. The adjudicating authority confirmed the demand as proposed in the show cause notice, however in appeal filed by the appellant, the Commissioner (Appeals) dropped the demand of service tax of ₹4,66,538/- and confirmed the demand of ₹1,43,933/- holding that the appellant had wrongly availed the credit without provision of output services, thereby contravened the provisions of rule 6(3) and 6(3A) of the Cenvat Credit Rules, 2004. The appellant has preferred the instant appeal before this Tribunal. 3. Heard Ms. Dheera Khatri, learned counsel for the appellant and Shri Rohit Issar, learned Authorized Representative for the Revenue. 4. The learned Counsel for the appellant referring to the definition of exempted service under rule 2(e) of the CCR, 2004 and also the Notification No. 24/2016 CE dated 13.04.2016 whereby Explanation 3 to rule 6(1) of the CCR, 2004 was added and on that basis submitted that to qualify as an exempted service , an activity has to first fit in the definition of service and since the activity of selling immovable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant statutory provisions concerning the present controversy, the observations made in a recent decision in M/s Shanti Reality Pvt. Ltd [Final order No. 57984/2024 dated 08.08.2024] needs to be looked into: 8. The statutory provisions to decide the issue of eligibility of Cenvat Credit needs to be appreciated. Section 65B(44)(a) defines service which means an activity carried out by a person for another, for consideration and includes a declared service, but shall not include transfer in the title of goods or removable property by way of sale, gift, or any other manner. Coupled with this, it is necessary to examine the provisions of 66E, which provides that following shall constitute declared services , namely, a) . renting of removal, property, b) . construction of a complex, building, civil structure, or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion certificate by the competent authority. Reading the two provisions together, it appears that construction of a complex falls under the category of declared service but once completion certificate is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l goods and service tax paid on input services used by him for providing the output service. Thus availment of cenvat credit has direct nexus to the payment of taxes. The very fact that the appellant has no liability to discharge the service tax they are not eligible to retain the amount availed by them towards the Cenvat credit. 11. Before adverting to the decisions cited at the Bar, it is necessary to take note of the observations of the authorities below. The adjudicating authority quoting the definition of input service as defined under Rule 2(l) of CCR, 2004, observed that since the sale of flats after completion certificate are not the output service , Cenvat credit cannot be availed on this input service , making assessee liable to pay proportionate Cenvat credit availed. The Commissioner (Appeals) in the impugned order while affirming that the appellant was required to reverse proportionate Cenvat credit towards unsold four residential flats also rejected the contention of the appellant that the amendment introduced vide Notification dated 13.04.2016 in Rule 6 of CCR, 2004 wherein Explanation 3 was added thereto, implied that it did not exist before such date and hence cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elhi High Court in M/s Lally Automobiles (supra), I conclude that it was for the appellant to have segregated the quantum of input service attributable to the unsold flats and exclude them from the records maintained for availing credit. Hence the appellant is not entitle to retain the amount of Cenvat credit in respect of the unsold flats and is required to proportionately reverse the same. 13. The decision of the Hon ble Delhi High Court in M/s Lally Automobiles decided the issue whether the assessee could claim the credit on input which were not services by holding that input credits can be used for payment of service on output service provided such services are used to provide output services. Further, it has been observed as under: 17. In the present case, the assessee s argument that there is no mechanism to reverse credit, once taken, in the opinion of this Court, cannot be accepted. The assessee was well aware of the exact nature and extent of its service tax liability . It was also aware of the eligible service tax inputs. Therefore, when it did claim successfully and unchallenged input credits in respect of activities that were not subjected to service tax levy, it was aw ..... X X X X Extracts X X X X X X X X Extracts X X X X
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