Whether credit of input services like construction, works contract services admissible when they are used for construction of warehouse that is rented?

PJ/Case Law/2013-14/1855

Case:-MAHALAXMI WAREHOUSE & ALLIED INDUSTRIES Vs. COMMR. Of C.Ex., RAJKOT.

Citation:- 2013 (31) S.T.R. 468 (Tri. –Ahmd.)

Brief Facts:-The appellants took the Cenvat credit of the service tax paid on input services like construction service, works contract service and also inputs like cement, steel etc. utilized for construction of warehouses which was rented out by them and utilized the same for payment of service tax on renting of immovable property service. The appeal filed by the appellant rejected on the ground that the appellant failed to deposit 50% of the service tax and penalty and lower Appellate Authority confirmed the demand with interest and imposed penalty.

Respondent’s Contention:-The learned counsel submits that the Commissioner (Appeals) has relied upon the Board’s Circular No. 98/1/2008- S.T., Dated 4-01-2008 to deny the credit. He submits that since the service and the input on which credit has been taken have been utilized in construction of warehouse which has been rented out, the issue is squarely covered by the definition of input service which includes services used in relation to setting up, renovation or repairs of the premises of provider of output service or an office relating to such factory or premises.

Reasoning of Judgment:-In this case the property itself is going to be rented out and therefore the appellant has a better case than the office of the provider of the service since without the building itself there cannot be any service. Tribunal find that appellant has a prima facie case in its favour and therefore it would have been in the interest of justice for the Commissioner to hear the appellant without insisting on any pre-deposit. Accordingly, at this stage itself, the requirement of pre-deposit is waived and the matter is remanded to the Commissioner (Appeals) with a direction to decide the appeal on merits without insisting on any pre-deposit after giving reasonable opportunity to the appellants to present their case.

Decision:- Appeal allowed by way of remand.

Comment:-The gist of this case is that when the property itself is going to be rented out, prima facie, the credit on such input services would be admissible since without the building itself there cannot be any service.

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PJ/Case Law/2013-14/1855

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