ST - Once demand of wrongly availed cenvat credit is proposed, there cannot be another demand for recovery of service tax which was discharged by utilizing so-called wrongly availed credit: CESTAT
By TIOL News Service
MUMBAI, DEC 08, 2017: THE CCE, Nashik passed the following order confirming the demands raised in the SCN -
(A) Demand of Cenvat Credit of Rs.5,46,82,044/-
A.1. Credit on Cement, Steel, TMT Bars, Doors, Windows etc.used for construction of mall under the category of input amounting to Rs.1,63,67,075/-.
A.2. Capital goods used in the mall such as Lift, Escalator, Chillers, D.G. Sets, Heat Exchangers, Wires, Cables, Fire Fighting Equipments, Water Pumps, Transformers, Control Panels Distribution Boards, Cables, Trays, CRP Tubes etc. etc. for operation of mall Rs.2,26,36,646/-.
A.3. Cenvat credit on various services such as Architect Service, Business Auxiliary Service, C & F Agency service, Consulting Engineer Service, Cargo Handling Service, etc. used for construction and operation of Mall Rs.1,01,76,663/-.
A.4. Cenvat Credit on various services such as Advertisement Agency Service, Broadcasting Service, Chartered Accountant Service, Cleaning Service, Insurance Service etc. used before completion of construction of shopping mall during April 2007 to March 2011 and after construction of shopping mall i.e. from April 2009 to March 2011 Rs.55,01,660/-.
B. Service Tax Demand of Rs.2,06,07,771/- towards utilization of inadmissible cenvat credit which includes cenvat demand mentioned above as A.
An amount of Rs.1,37,88,388/- paid by the assessee is appropriated against the confirmed demand.
Interest and penalties galore have also been imposed under various provisions of the FA, 1994.
The appellant filed a stay application before the CESTAT and the following order 2014-TIOL-132-CESTAT-MUM was passed -
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ST - CENVAT - Renting of Immovable property service - applicant constructed a shopping mall and availed credit in respect of service tax paid on capital goods, inputs as well as input services used in or in relation to the construction - Revenue denying credit on the ground that the shopping mall is an immovable property and is not liable to CE duty or ST as output service - another ground is that ST on the construction activity has been paid by the contractor by availing the benefit of notfn. on the claim that credit on inputs and capital goods has not been availed - applicant has already reversed the credit on inputs of Rs.1.38 crores used in construction of mall - applicant also pleading financial hardship as commercial shops are not fully rented out and they are facing losses - considering financial hardship and following the decision of Tribunal in Galaxy Mercantiles, applicant are liable to pay 35% of the credit availed on capital goods, which comes to Rs.79 lakhs in addition to that already deposited - pre-deposit ordered: CESTAT [paras 6 & 7]
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Aggrieved by this order, the applicant/appellant had filed an appeal before the Bombay High Court which held thus 2014-TIOL-2704-HC-MUM-ST -
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ST - Assessee constructed shopping mall and availed cenvat credit on excise duty paid on capital goods, input goods/services used & provided 'Renting of Immovable Property' service - Assessee used cenvat credit to pay service tax on the output service, which was challenged by revenue & duty demand with interest & penalty was imposed - Subsequently, Tribunal ordered the assessee to deposit 35% of the credit amount over & above the credit already reversed, which is challenged by assessee - Held - Although the case law relied upon by revenue applies squarely on to the present facts & circumstances, there is one notable distinction, wherein the assessee in the present case pled financial hardship in depositing the duty demanded - Based on this sole ground, time for deposit extended and Tribunal directed to hear case on merits: High Court (Para 3,4,9,10,11)
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The appeal was heard in June 2017 and an order was passed recently.
Elaborate arguments were made by both sides replete with supporting case laws.
After considering the same, the Bench in a detailed order held thus -
CENVAT credit of Rs. 1,63,67,075/-:
+ As per the definition of input for the purpose of providing service, it is clear that only on those inputs Cenvat is allowed which are used for providing the output service. In the present case, cement, steel, for steel, angles, channels etc. were not used for providing output service i.e renting of immovable property. The same was used for providing construction service which is not the output service of the appellant, therefore the cenvat credit is not admissible. [Bharti Airtel Ltd. 2014-TIOL-1452-HC-MUM-ST relied upon]
CENVAT credit of Rs.2,26,36,646/-:
+ The adjudicating authority denied the credit only on the ground that these capital goods after installation become immovable goods, therefore, the credit is not admissible. We find that all the capital goods were cleared by the supplier on payment of duty, therefore, the capital goods as such it cannot be said that it is immovable goods. Merely by installing the capital goods it does not become an immovable goods. If this contention of the adjudicating authority is accepted then all the capital goods such as machinery, equipments, appliances installed in the factory for production will not be eligible for cenvat credit. All these capital goods were directly used by the appellant for providing output service i.e. renting of immovable property service. Accordingly the cenvat credit on the capital goods is admissible, the demand of Rs. 2,26,36,646/- on this count is set aside.
CENVAT credit of Rs. 1,01,76,663/-:
+ From the definition ( of rule 2(l) of CCR, 2004) it can be seen that the services used for setting up the premises of output service provider is admissible input service. In the present case the appellant are output service provider and got the shopping mall set up which was rented out, therefore the renting of immovable property is an output service and the various services such as construction work service, architect service consulting engineer, erection, commissioning, installation etc, were used for setting up of shopping mall are input services. Therefore these services are clearly input service …
[(i) Maharashtra Cricket Association - 2015-TIOL-2418-CESTAT-MUM (ii) Oberoi Mall Ltd. - 2016-TIOL-704-CESTAT-MUM and (iii) Vamona Developers Pvt. Ltd. - 2015-TIOL-2705-CESTAT-MUM relied upon.]
+ In view of the above decisions which were given after detailed interpretation of definition of input service, the services used for construction of shopping mall are admissible for cenvat credit. We therefore set aside the demand of Rs. 1,01,76,663/-.
CENVAT credit of Rs.55,01,660/-:
+ Credit availed on the services such as advertisement, broadcasting, C.A., cleaning service, insurance service, management maintenance and repair service etc., the same was denied on the allegation in the show cause notice that these services have no nexus to the output service of renting of immovable property.
+ The services which was used after completion of construction of shopping mall were also used ultimately for the renting of shopping mall, therefore, the same is input service for providing the service of renting of immovable property service.
+ We also observed that the adjudicating authority has not given clear reasoning for denying this particular credit. Accordingly we set aside the demand of cenvat credit of Rs. 55,01,660/-.
Demand of service tax of Rs. 2,06,07,771/-:
+ This demand was confirmed on the ground that the service tax was paid to the extent of this amount by utilising the cenvat credit which was held inadmissible. In this regard we are of the view that once demand of wrongly cenvat credit is proposed, there cannot be another demand of recovery of service tax which was discharged by utilizing so called wrongly availed credit for the reason that by recovery of the wrongly availed credit whatever service tax paid by utilizing cenvat credit will hold good, no further recovery can be made. Therefore the demand of service tax amounting to Rs. 2,06,67,771/- is set aside.
The appeal was partly allowed.
(See 2017-TIOL-4322-CESTAT-MUM)
