The Bangalore bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that advertising and marketing, banking and financial services are admissible to Cenvat credit.
M/S. Gmr Airport Infrastructure Ltd., the appellants, are registered with the Department and offer taxable services under the following categories: Business Auxiliary Services, Consulting Engineering Services, Management or Business Consultancy Services, Construction Services (Commercial or Industrial Buildings or Civil Structure), etc. When their records from October 2007 to March 2012 were audited, it was discovered that the appellant had completed a number of road building projects, including the Chennai outer ring road, Hyderabad Vijayawada, and Hungund-Hospet.
Although it was claimed that the construction of roads was exempt from service tax, other types of work, such as the construction of administrative buildings, rest areas, and toll plazas, are subject to service tax. Additionally, it was discovered through a review of the records that the appellant had improperly claimed cenvat credit for a number of input services from 2007–2008 to 2011–2012, including advertising and marketing, banking and financial services, management consulting, works contracts, air travel agencies, and security services.
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On October 7, 2014, they received a show-cause notice for the collection of Rs. 4,29,55,368 for non-payment of service tax and Rs. 3,88,91,726 for obtaining an inadmissible cenvat credit with interest and penalty. Following adjudication, the demands were upheld along with a penalty and interest.
The appellant argued that the impugned order incorrectly held that the appellant’s activities did not fall under the category of “Construction of Roads,” and as a result, the appellant was not granted an exemption from the “Construction of Roads” services. The appellant’s activities included building other facilities, such as a toll plaza, administrative building, restrooms, etc., for the purpose of collecting toll fees.
The argument was made that the subcontract agreement between the appellant and the Engineering Procurement and Construction (EPC) contractor clearly stipulates that the scope of work will include “engineering, procurement, construction of roads” in accordance with the EPC contract’s specifications, and that the scope of the projects will include the EPC contractor’s performance and execution of all design, engineering, procurement, construction, and completion of the Project Highway.
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According to the aforementioned Agreement, “Construction of Roads” and other infrastructure are included in the construction. Additionally, the appellant’s invoices for the job they did show that they engaged in “Construction of Roads,” which refers to building roads and other facilities. Additionally, he has argued that the appellant’s actions are exempt from paying service tax under Notification No.25/2012-ST at Sl. No.13(a).
Regarding the admissibility of cenvat credit, the advocate has argued that the services they have received credit for—namely, marketing and advertising, banking and financial services, management consulting, works contracts, air travel agencies, and security services—have been deemed creditable in a number of this Tribunal’s rulings.
A two member bench of Dr. D.M. Misra, Member (Judicial) and Mrs. R. Bhagya Devi, Member (Technical) viewed that, as regards the issue relating to admissibility of benefit of exemption Notification for construction of toll plaza, administrative building, rest rooms, etc., being part of the activity of ‘Construction of Roads’ was considered by this Tribunal in appellant’s own case as reported at 2021.
On the second issue of admissibility of cenvat credit on input services viz., Advertising and Marketing, Banking and Financial Services, Management Consultancy, Works Contract, Air Travel Agency and Security services, etc., are covered by the judgments of this Tribunal referred by the appellant.
The bench set aside the impugned order and the appeal is allowed with consequential relief, if any, as per law.
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