The Bangalore bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the benefit of CENVAT credit cannot be denied on lifts fitted into the building.
The appellant, M/s Divya Sree R O W Projects LLP is engaged in the 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. The Appellant imported passenger lifts and availed the credit of CVD paid. During the scrutiny of records by the department audit team, the availment of credit on passenger lifts was raised contending that lifts were capital goods and credit on such capital goods are not allowed.
The appellant submitted that the impugned order denying the CENVAT credit on passenger lifts is not sustainable in law as the same has been passed without properly appreciating the facts, the provisions of law, and the binding judicial precedents. The appellant is engaged in the construction of a complex, building, civil structure, etc., and the said activity is declared as service in terms of Section 66E(b) of the Finance Act.
The appellant added that the capital goods are used for providing output services. He also submitted that imported lifts are mandated for the construction of the building and therefore the appellant has used the capital goods for providing output service/ works contract service. In terms of Service Tax Determination of Value Rules, once an Appellant is engaged in providing works contract service, such service provider is entitled to credit on input services and on capital goods but the impugned order has traveled beyond the Rule book to come out with a jurisprudence that “there exist two distinct portion/components viz. material portion and service portion. He further submitted that under the Finance Act, 1994, the entire works contract is not considered as service and only the service portion in the execution of the works contract is considered as service.
The Coram of Judicial Member S.S.Garg held that the lift is essential for providing the output service and therefore, the appellant has fulfilled both the conditions to avail the credit, hence the denial of credit is not sustainable, simply because the lifts are fitted into the building does not have an impact on the treatment of lifts as capital goods because even after fitting into the building, the lift is a lift and covered under Chapter 84 and cannot be considered as input just to deny the benefit of CENVAT credit.
“As per the Construction Agreements also, the lift is one of the common facilities provided in the project and lift is a capital goods being used for providing taxable services on which service tax is being paid by the appellant, therefore denying the benefit of credit on capital goods is not proper. Further, I find that the findings in that the lifts were not used in providing service but used in the supply of material hence not eligible for credit, is not sustainable in law because the capital goods used cannot be attributed to service portion and material portion as envisaged in the order. Therefore, the basis to deny the credit is not legally sustainable,” the CESTAT said.
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