The Chennai CESTAT in a recent ruling, held that assesses engaged in providing renting of immovable property services can avail credit of service tax paid on construction services.
Appellant-Assessee was engaged in providing renting of immovable property services. The department during the course of audit, noticed that the assesse had availed credit of the service tax paid on construction services. Consequently, it demanded the irregularly availed credit along with interest and also imposed penalties.
The order was upheld by the appellate authority on first appeal.
It was contended on behalf of the appellant that the construction services were availed by the appellant for constructing the building which was rented out to customers. Since they were engaged in providing the output services of renting of immovable property service, they are entitled to avail the credit on construction service. They further relied on the decisions in Mundra Ports & Special Economic Zone Ltd. Vs. Commissioner of Central Excise & Customs and Varun Industries Vs. Commissioner of Central Excise.
However, the department vehemently argued that such services have no nexus with the output services provided by the appellant and also the services rendered were used for construction of immovable property and therefore the appellants are not eligible for credit.
The bench noted the fact that the period involved is prior to 1.4.2011. According to the Judicial Member, Smt. Sulekha Beevi, “the definition of input services had a wide ambit as included the words activity relating to business and also services used for setting up for a plant/premises of an office. The appellants being engaged in providing renting of immovable property, construction services availed by them for construction of the building which is later rented out is eligible for credit is decided in the judgments relied upon by the appellants.”
Read the full text of the Order below.