Whether Cenvat Credit of service tax paid on input services used in the construction of immovable property which is further rented out be availed?

PJ/Case Law/2014-15/2366

Case:OBEROI MALL LTD Vs COMMISSIONER OF SERVICE TAX, MUMBAI

Citation:2014-TIOL-1757-CESTAT-MUM

Brief Fact:

The appeal and stay petition are directed against order-in-original No. 04-06/ST-II/RS/2014 dated 30/01/2014 passed by the Commissioner of Service Tax, Mumbai. Vide the impugned order, the learned adjudicating authority has disallowed Cenvat Credit amounting to Rs.2,02,62,906/- availed by the appellant in respect of various input services relating to construction of mall which was subsequently rented out to various customers. Apart from the service tax demand, interest liability has also been confirmed and equivalent amount of penalty under Section 78 and a penalty of Rs.5,000/- under Section 77 were also imposed. Aggrieved of the same, the appellant is before us.

Appellant contention:

The learned Consultant for the appellant submits that this is second round of litigation. In the first round of litigation, when the matter had come up before this Tribunal, this Tribunal had granted stay vide order No.S/163-165/13/CSTB/C-I dated 14/01/2013=2013-TIOL-604-CESTATMUM and thereafter vide Order No. ST/CO/91025 to 91027/13 dated 22/05/2013 = 2013-TIOL- 1241-CESTAT-MUM the matter was remanded back to the adjudicating authority to give clear finding as to why the appellant is not eligible for the benefit of service tax paid on inputs services in respect of construction services, in the light of the decision of the Hon'ble High Court of Gujarat in the case of Cadila Healthcare Ltd.{2013 (30) ST 3} = 2013-TIOL-12-HC-AHM-STand the decision of this Tribunal in the case of Navaratna S.G. Highway Prop (P) Ltd. {2012 (28) STR 166 (Tri-Ahmd-2012-TIOL-1245-CESTAT-AHM. In the second round of litigation, the adjudicating authority has once again confirmed the demand by denying the credit by relying on the decision of the Hon'ble High Court of Allahabad in the case of Galaxy Mercantile Ltd. = 2013-TIOL-751-HCALL- ST. The learned Consultant submits that in the Galaxy Mercantile Ltd. case, the question for consideration before the Hon'ble High Court was, whether Cenvat credit on inputs and capital goods could be availed in respect of a building constructed which was subsequently used for warehousing purpose. In that case, the Tribunal vide order dated 24/07/2013 2013-TIOL-1442-CESTAT-DEL, by majority decision, held that Cenvat Credit availed on inputs service is not required to be reversed and only directed pre-deposit of 35% of the Cenvat Credit attributable to inputs and capital goods. The said decision was challenged before the Hon'ble High Court of Allahabad and the same was upheld. Therefore, the question of availing Cenvat Credit on inputs service on the construction of immovable property was not considered by the Hon'ble High Court at all. Therefore, reliance on the same decision for confirmation of service tax demand is clearly not sustainable.
The learned Consultant further submits that as per the decision of the Hon'ble High Court of Andhra Pradesh in the case of Sai Sahmita Storages (P) Ltd. = 2011-TIOL-863-HC-AP-CXthe credit of service tax paid on input service is available when the same is used for construction of immovable property, which is thereafter used for warehousing. He also referred to the decision in the case of Navratna S.G. Highway Prop. (P) Ltd., wherein a similar view was taken. Accordingly he pleads for grant of stay.

Respondent Contention:
The learned Commissioner (AR) appearing for the Revenue reiterates the findings of the adjudicating authority and it is his contention that the impugned demands are sustainable in law and the appellant be put to terms.

Reasoning of Judgment:
As regards the reliance placed by the adjudicating authority in the case of Galaxy Mercantile Ltd., the said decision did not pertain to eligibility of Cenvat Credit on input services which were used in the construction of an immovable property. The question for consideration before the Hon'ble High Court was only limited to eligibility of Cenvat Credit on inputs and capital goods. In fact, in the said case, this Tribunal had held that the appellant was eligible for availing Cenvat Credit of service tax paid on input services and therefore, reliance placed by the adjudicating authority on this decision does not support the Revenue's case at all.

We further observe that the Hon'ble High Court of Andhra Pradesh in the case of Sai Sahmita Storages (P) Ltd. and this tribunal in the case of Navratna S.G. Highway Pro. (P) Ltd. has held that Cenvat Credit of service tax paid on input services used in the construction of immovable property would be available if such immovable property is used for rendering other taxable services. Following the same in the present case also, we hold that the appellant has made out a prima facie case for grant of stay. Accordingly, we grant unconditional waiver from pre-deposit of dues adjudged against the appellant and stay recovery thereof during the pendency of the appeal.

Decision : Stay granted

Comment:
The tribunal while delivering its decision stated that there is no such bar on the availment of input services used in the construction of immovable property to the extent such constructed property is further used in the rendering of other output services.

Prepared By: Meet Jain

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PJ/Case Law/2014-15/2366

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