Custom, Excise & Service Tax Tribunal
M/S Dlf Cyber City Developers Ltd vs Commissioner Central Excise & Cgst, ... on 3 January, 2018
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH-160017 SINGLE BENCH COURT NO.1 Appeal No. ST/60752/2017 [Arising out of the Order-in-Appeal No. 107-ST-APPEAL-II-MK-GGM-2017 dated 05.06.2017 passed by the Commissioner Service Tax (Appeals)-II, Delhi, (Gurgaon)] Date of Hearing/Decision: 03.01.2018 For Approval & signature: Honble Mr. Ashok Jindal, Member (Judicial) M/s DLF Cyber City Developers Ltd. Appellant Vs. Commissioner Central Excise & CGST, Gurugram Respondent
________________________________________________ Appearance Shri. P.K. Mittal, Advocate- for the appellant Shri. G.S.Dhillion, AR- for the respondent CORAM: Honble Mr. Ashok Jindal, Member (Judicial) FINAL ORDER NO: 60018 / 2018 Per Ashok Jindal:
The appellant is in appeal against the impugned order for denial of cenvat on various input/input services.
2. The brief facts of the case are that the appellant is builder and engaged in the activity of construction of commercial, industrial and residential premises and thereafter these premises were let out by the appellant. The appellant availed the services of construction for these premises prior to 01.04.2011 and availed cenvat credit on the same but utilised during the period 01.04.2011 to 31.03.2012 for payment of service tax under the category of Renting of Immovable Service. The revenue issued the show cause notice to the appellant to deny cenvat credit on the input services availed by them for construction of the premises which are immovable in nature, therefore, the cenvat credit sought to be denied as these services are not availed by the appellant for construction of any goods or service provided by them. As these premises become immovable property, therefore, they do not qualify as goods/capital goods. The matters were adjudicated. Demand of service tax was confirmed by denying cenvat credit to the appellant along with interest and the penalty was also imposed.
3. The Ld. Counsel for the appellant submits that the appellant has availed service in question for providing output service and as per Rule 2 (K) of the Cenvat Credit Rules, 2004, if any input used for providing output service, the assessee is entitled to avail cenvat credit. Further, the services which were used for providing taxable output service are entitled to avail cenvat credit as per Rule 2 (l) of the Cenvat Credit Rules, 2004. Admittedly, all these services have been availed by the appellant for providing output service, therefore, the appellant is entitled to avail cenvat credit on these services. The reason for denial of cenvat credit by the revenue is that as these premises becomes immovable property and looses character of goods, therefore, they are not entitled to avail cenvat credit is not correct as held by the Honble High Court of Madras in the case of Dalmia Cements (Bharat) ltd. C.M.A nos. 633-635/2009, wherein, it has been held that any steel items used for fabrication of supports structure which is embedded to earth and used for installation of plant & machinery is entitled for cenvat credit, therefore, the appellant is entitled to avail cenvat credit. He also relied on the decision of the Honble High Court of Andhra Pradesh in the case of Sai Sahmita Storages (P) ltd. reported in 2011 (23) STR 341 (AP) to say that the facts of the case are similar to the said case and in the said case the Honble High Court held that they are entitled to avail cenvat credit. He also took support of the decision of this Tribunal in the case of Lemon Tree Hotel reported in 2017 (63) GST 364, therefore, he prayed that the impugned order is to be set aside.
3. On the other hand, the ld. AR submits that as per the CBEC Circular No. 98/01/2008-ST dated 04.01.98, the appellant is not entitled to avail cenvat credit. He further submits that the decision of the Honble High Court of Andhra Pradesh in the case of Sai Sahmita Storages (P) Ltd.(Supra) has been challenged before the Honble Apex Court and the same is pending for consideration. He also submits that w.e.f 01.04.2011, some specific services availed for construction of a building are not entitled to avail cenvat credit and the services in question are covered under the specific services, therefore, the appellant is not entitled to avail cenvat credit. He further submits that in case of inputs used for construction of a building are not entitled for cenvat credit as per Rule 2 (K) of the Cenvat Credit Rules, 2004.
4. Heard the parties and considered the submissions.
5. I have gone through the records placed before me, I find that the sole reason of denial of cenvat credit in the show cause notice is that the premises which have been let out by the appellant are immovable property, therefore, they are looses the identity of the goods, therefore, any input or services used for construction of this premises are not entitled for cenvat credit. The argument advanced by the ld. AR apart from the allegation made in the show cause notice are not relevant to the facts of this case. Further, I find that all these input/input service in question have been availed by the appellant prior to 01.04.2011 but the same has been utilised for payment of service tax after 01.04.2011. In cenvat credit Rules, 2004, there is no bar of utilisation of cenvat credit availed any service or inputs received by the assessee prior to 01.04.2011 but the cenvat credit is not admissible after 01.04.2011. Moreover, it is not the case of the Revenue. In fact, the appellant has availed cenvat credit all these service/inputs prior 01.04.2011 but the same has been utilised after 01.04.2011, therefore, the availment of cenvat credit cannot be disputed. Further, the only issue is decided by me is that whether the appellant is entitled to avail cenvat credit on the input/input service in question for used for construction of immovable property or not. The said issue has been examined by this Tribunal in the case of Lemon Treee Hotel (Supra) wherein the facts of this case are reproduced as under:
2. The relevant facts that arise for consideration in these appeals are the appellants herein had availed CENVAT credit during the period April, 2008 to September, 2009 of the service tax paid by the service providers under Works Contract Services, Project Management Services and Architectural Professional Services which are utilized for construction of a building to be a hotel. Revenue Authorities are of the view that the service tax credit cannot be availed on these services by the appellants as said property is immovable property. Coming to such a conclusion, two different show cause notices were issued for the demand of the CENVAT credit availed by the appellants along with interest and also for imposition of penalties. One of the allegations in the show cause notices was also that the invoices issued by the service providers were not in the name of appellants the CENVAT credit was availed prior to registration. Both the appellants contested the show cause notice on merits. The adjudicating authority after following due process of law, did not agree with the contentions raised by the appellant and confirmed demands raised along with interest and also imposed equivalent amount of penalty. The adjudicating authority in both the orders decided the issue against the appellant on the ground that they could not availed CENVAT credit on the input services which are used for construction activity and did not decide the other issues i.e., the invoices being not in the name of the appellant and CENVAT credit was availed prior to registration. And this Tribunal observed as under:
5. On careful consideration of the submissions made by both sides and perusal of records, we find that the issue that falls for consideration of this Bench is whether the service tax paid on Works Contract Services, Project Management and Architectural Professional Services can be considered as input services for the appellant when these services are used for construction of hotel.
6. It is undisputed that the services are utilized for brining to existence building which is used by the appellants for hospitability business and is used for rendering output services like mandap keeper and health club and fitness centre and dry cleaning service and internet cafe services. It is an unimaginable that a hotel can render these services without a building in its place. In our considered view, the input services are availed by the appellant in respect of Works Contract Services, Project Management Services and Architectural Professional Services used for construction of a building, which subsequently is put into use for rendering taxable output services. We find that the adjudicating authority was in error to rely upon the Board Circular No. 98/1/2008-ST dated 04.01.2008 in as much, the definition of input services during the relevant period does not bar availment of CENVAT credit all input services. In order to appreciate correct position of law, the definition of input services under Rule 2(l) of the CENVAT Credit Rules, 2004 as was during the relevant period of these cases is reproduced:
input service means any service,-
(i) used by a provider of taxable service for providing an output service; or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upt9o the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal.
It can be seen from the above reproduced Sub rule, that input services includes the services used in relation to settingup, modernization, renovation of premises of provider of output services. In the case in hand, the definition is reproduced as above categorically will apply and the clarification given by the Board in CBEC Circular dated 04.01.2008 is going beyond the definition as reproduced is herein above. We find that similar issue as to eligibility to avail the CENVAT credit on design and engineering of pipe line, services rendered by the pipeline laying of contractors, was denied in the case of Reliance Gas Transportation Infrastructure Ltd., (supra), holding that these services were utilized for brining into existence an immovable property. The Bench after considering the definition of input services, held that the provisions of Section 2(l) of the CENVAT Credit Rules, 2004 very clearly indicate eligibility to avail CENVAT credit of the service tax paid on these services.
7. Views of the Tribunal have been fortified by decision of the Honble High Court of Gujarat in the case of Mundra Ports and Special Economic Zone Ltd., (supra) the ratio is in paragraph No. 7, 8 & 9 which we with respect reproduce:
7. It is not disputed that jetty was constructed and input credit was claimed on cement and steel. The aforesaid definition of Rule 2(k) was applicable and Explanation 2 did not provide that cement and steel would not be eligible for input credit. According to learned Counsel for the appellant, the appellant is not manufacturer and, therefore, the provisions of Explanation 2 of Rule 2(k) would be applicable only to the factory and manufacturer. The appellant is neither having any factory nor he is manufacturer. The appellant is a service provider of port. We need not go into this question as to whether the appellant is a factory or manufacturer or service provider in view of the fact that it is not disputed by Mr. Y.N. Ravani, learned counsel appearing for the Revenue in this Tax Appeal that the appellant provides service on port for which he is getting jetty constructed through the contractor and the appellant has claimed input credit on cement and steel. The cement and steel were not included in Explanation 2 from 2004 up to March, 2006. The Cenvat Credit Rules, 2004 were amended in exercise of the powers conferred by Section 37 of the Central Excise Act, 1944 with effect from 7-7-2009, the date on which it was notified by the Central Government from the date of the notification. According to learned Counsel for the appellant, this amended definition would apply only to the factory or manufacturer and would not apply to the service provider. According to him, either before the amendment made in the year 2009 or thereafter, the appellant was neither factory nor manufacturer and he has only constructed jetty by use of cement and steel for which he was entitled for input credit as jetty was constructed by the contractor, but the jetty is situated within the port area and the appellant is a service provider. According to the appellant, his case is squarely covered by the judgment of the Division Bench of the Andhra Pradesh High Court in Commissioner of Central Excise, Visakhapatnam-II v. Sai Sahmita Storages (P) Limited, 2011 (270) E.L.T. 33 (A.P.) = 2011 (23) S.T.R. 341 (A.P.) wherein in Paragraph 7, it has been clearly held that a plain reading of the definition of Rule 2(k) would demonstrate that all the goods used in relation to manufacture of final product or for any other purpose used by a provider of taxable service for providing an output service are eligible for Cenvat credit. It is not in dispute that the appellant is a taxable service provider on port under the category of port services. Therefore, the appellant was entitled for input credit and the decision of the Division Bench of the Andhra Pradesh High Court squarely applies to the facts of the case and answered the question on which the appeal has been admitted.
8. Mr. Y.N. Ravani, learned counsel for the Revenue has placed reliance on the decision of the Larger Bench of the Tribunal in Vandana Global Limited v. Commissioner of Central Excise, Raipur, 2010 (253) E.L.T. 440. We have carefully gone through the decision of the Larger Bench of the Tribunal. We do not find that amendment made in Cenvat Credit Rules, 2004 which come into force on 7-7-2009 was clarificatory amendment as there is nothing to suggest in the Amending Act that amendment made in Explanation 2 was clarificatory in nature. Wherever the Legislature wants to clarify the provision, it clearly mentions intention in the notification itself and seeks to clarify existing provision. Even, if the new provision is added then it will be new amendment and cannot be treated to be clarification of particular thing or goods and/or input and as such, the amendment could operate only prospectively. In our opinion, the view taken by the Tribunal is based on conjectures and surmises as the Larger Bench of the Tribunal used the expression that intention behind amendment was to clarify. The coverage under the input from where this intention has been gathered by the Tribunal has not been mentioned in the judgment. There is no material to support that there was any legislative intent to clarify any existing provision. For the same reason, as mentioned above, the decision of the Apex Court in Sangam Spinners Limited v. Union of India and Others, reported in (2011) 11 SCC 408 = 2011 (266) E.L.T. 145 (S.C.) would not be applicable to the facts of the instant case.
9. Mr. Ravani has also vehemently urged that since jetty was constructed by the appellant through the contractor and construction of jetty is exempted and, therefore, input credit would not be available to the appellant as construction of jetty is exempted service. The argument though attractive cannot be accepted. The jetty is constructed by the appellant by purchasing iron, cement, grid, etc., which are used in construction of jetty. The contractor has constructed jetty. There are two methods, one is that the appellant would have given entire contract to the contractor for making jetty by giving material on his end and then make the payment, the other method was that the appellant would have provided material to the contractor and labour contract would have been given. The appellant claims that he has provided cement, steel, etc., for which he was entitled for input credit and, therefore, in our opinion, the appellant was entitled for input credit and it cannot be treated that since construction of jetty was exempted, the appellant would not be entitled for input credit. The view taken contrary by the Tribunal deserves to be set aside.
8. It can be seen from the above reproduced paragraphs of the judgment of the Honble High Court of Gujarat the issue avaliment of CENVAT credit on the input services which are used for brining into existence of immovable property are also eligible for availment of CENVAT credit.
9. In view of the foregoing, and the facts and circumstances of this case, we hold that the impugned order is unsustainable and liable to be set aside and we do so. The impugned order is set aside and the appeals are allowed with consequential reliefs, if any.
8. As this Tribunal after examining the issue held that the assessee is entitled to avail cenvat credit. Relying on the decision of Mundra Ports & Special Economic Zone Ltd. 2015 (39) STR 726 (Guj.) wherein, it was held that any input/input service availed cenvat credit for construction of a building which have been let out by the assessee, therefore, the assessee is entitled to avail cenvat credit for the inputs/inputs service used prior to 01.04.2011.
9. In view of the above analysis, I hold that as all the inputs/inputs service has been used by the appellant for construction of a building which has been let out by the appellant and paying service tax thereon under the category of Renting of Immovable Service therefore, the appellant is entitled to avail cenvat credit. Accordingly, I do not find any merit in the impugned order, the same is set aside. The appeal is allowed with consequential relief.
(Dictated and pronounced in the open court) Ashok Jindal Member (Judicial) rt 9 ST/60752/2017