CESTAT Allows CENVAT Credit on Construction Services Used for Renting of Immovable Property, says Appellant Eligible to Take Credit [Read Order]
The Bench observed that Renting of Immovable Property Service cannot be provided in the absence of input services which were received by the appellant for construction of building
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Bench at Chandigarh has held that CENVAT credit cannot be denied on input services used for construction of immovable property, when such property is subsequently used for providing taxable Renting of Immovable Property Service. The Tribunal set aside the demand raised by the Department, holding the impugned order to be unsustainable in law.
The appeal was filed by DLF Cyber City Developers Limited, against an order by the Commissioner of Service Tax, New Delhi. The order disallowed CENVAT credit availed on inputs, input services and capital goods used for construction of commercial buildings that were later rented out, on the ground that immovable property is neither excisable goods nor a taxable service.
The Tribunal noted that the appellant was engaged in providing taxable services including renting of immovable property, and had availed CENVAT credit on architect services, consulting engineer services, legal consultancy, management consultancy, security services, chartered accountant services and works contract services. The Department alleged that these services were used for construction of immovable property and hence, lacked nexus with the output service.
Rejecting the Department’s stand, the Tribunal examined the definition of “input service” under Rule 2(l) of the CENVAT Credit Rules, 2004. The Bench held that the definition is wide enough to cover services used directly or indirectly for providing output service.
It was observed that renting of immovable property service cannot be provided without construction and maintenance of the building itself, and therefore, services used for setting up such premises fall within the ambit of eligible input services.
The Tribunal further relied on various judicial precedents, including decisions in CCE v. Ultratech Cement Ltd., Regency Park Property Management Services Pvt. Ltd. v. Commr. of ST, and other orders passed in the appellant’s own case. A Punjab and Haryana High Court judgment in M/s Bellsonica Auto Components India Pvt. Ltd. was also taken note of, wherein the Revenue’s appeal was dismissed in a similar matter.
Another key observation by the Bench was that although construction services were specifically excluded from the definition of input service only with effect from April 1, 2011, the period involved in the present case was prior to the amendment.
On limitation, the Tribunal held that extended period could not be invoked as the appellant had regularly filed ST-3 returns and there was no evidence of suppression or intent to evade tax.
Accordingly, the Tribunal allowed the appeal and set aside the demand, interest and penalties. The matter was heard by a bench comprising Justice S.S. Garg, (Judicial Member), and P. Anjani Kumar (Technical Member).
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