Relief to Emaar MGF: CESTAT quashes Service Tax Commissioner’s Order confirming recovery of CENVAT credit with Interest, Penalty [Read Order]

In a relief to the Emaar MGF, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Delhi Bench quashed the Service Tax Commissioner’s Order confirming recovery of CENVAT credit with interest and penalty.

The appellant, M/s. Emaar MGF Land Ltd. undertook certain construction projects and entered into two separate agreements with each purchaser of the flat. The first agreement was in respect of the construction of the flat/unit. The second agreement was in respect of the sale of land. The first agreement has been described as a ‘construction agreement’, wherein the appellant agreed to design and promote the residential project of various apartments. The second agreement has been described as an ‘agreement for sale executed between the appellant and the purchaser, wherein when the purchaser requested the vendor to convey an undivided share in the land, the title is conveyed subject to terms of the agreement.

During the period from July 2008 to January 2009, the appellant discharged service tax of Rs. 5,31,67,272/- on works contract service, out of which Rs. 2,44,48,096/- was deposited by utilization of CENVAT credit. It is stated by the appellant that since the Composition Scheme did not bar availment of credit on capital goods and input services, the appellant availed credit on the same, and the payment of service tax was also accepted by the Department without any objection.

However, based on audit objections raised by the Department, a show-cause notice dated 17.04.2014 was issued to the appellant, proposing to deny the CENVAT credit of Rs. 2,44,48,095/- by alleging that the activity of construction of residential complexes by a builder became taxable only after the insertion of an Explanation in the definition of taxable service of ‘construction of complex service’ under section 65(105)(zzzh) of the Finance Act and this service was not taxable prior to such date. Consequently, credit could not have been availed by the appellant during the relevant period and the same was recoverable with interest and imposition of penalty.

The coram headed by Vice President Justice Dilip Gupta and P.V. Subba Rao noted that the proposal in the show cause notice relating to recovery of amount under section 73A of the Finance Act and interest thereon under section 73B of the Finance Act has not been confirmed in the impugned order. This is also clear from the impugned order which has also been reproduced in paragraph 8 of this order. It is only the recovery of CENVAT credit of Rs.2,44,48,095/- that has been confirmed under section 73(1) of the Finance Act.

“When the demand could not have been confirmed under section 73(1) of the Finance Act, it will not be necessary to examine the other contentions raised by the learned Counsel for the appellant for quashing the impugned order,” the tribunal said.

To Read the full text of the Order CLICK HERE

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Emaar MGF Land Ltd. vs Commissioner of Central Excise and CGST , 2021 TAXSCAN (CESTAT) 211 , Shri Narender Singhvi , Shri J.P. Singh and Shri Vivek Pandey