Custom, Excise & Service Tax Tribunal
M/S. Vamona Developers Pvt. Ltd vs Commissioner Of Customs, Central ... on 16 October, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal No. ST/87806/2013-Mum (Arising out of Order-in-Original No.37/ST/P.III/Commr.2012-13 dt. 10.4.2013 passed by the Commissioner of Customs, Central Excise & Service Tax, Pune-III ) For approval and signature: Honble Mr. P.S.Pruthi, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial) ============================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
=============================================================
M/s. Vamona Developers Pvt. Ltd.
:
Appellant
VS
Commissioner of Customs, Central Excise & Service Tax, Pune-III
:
Respondent
Appearance
Shri S.S. Gupta, C.A. with
Shri Vinod Awtani, C.A. for Appellant
Shri Roopam Kapoor, Commissioner (A.R) for respondent
CORAM:
Mr. P.S.Pruthi, Member (Technical)
Mr. Ramesh Nair, Member (Judicial)
Date of hearing : 16/10/2015
Date of pronouncement : 2/12//2015
ORDER NO.
Per : P.S. Pruthi
This appeal is directed against the impugned Order-in-Original dt.10.4.2013 denying the service tax credit of Rs.8,34,74,601/- and ordering recovery of the same alongwith interest and imposing equivalent penalty under Rule 15(3) of the Cenvat Credit Rules read with Section 78 of the Finance Act, 1994.
2. The appellant is engaged in the business of construction and sale of commercial properties. They provided taxable service of Commercial or Industrial Construction Service (CICS) & Renting of Immoveable Property Service (RIPS). Initially, they obtained service tax registration for their Mumbai premises under the taxable category of Architects service w.e.f. 26.2.2007. Subsequently they obtained centralized registration in Pune (which included Mumbai premises) in February 2011 under the taxable category of various services including the above two services of CICS and RIPS. They constructed a mall at Pune for which they received various input services and capital goods during the period June 2007 to March 2011. They filed ST-3 return without showing availment of input tax credit. However, they filed revised return for the period October 2010 to March 2011 on 21.7.2011 indicating availment of Cenvat Credit of service tax paid on input services and capital goods procured during the period June 2007 to March 2011. They had sold 20% of the constructed area and availed only balance credit of 80% on input services and capital goods. They submitted to the department the documents such as invoices etc. for verification of the eligibility of credit. A show cause notice was issued proposing to deny the credit on the ground that the appellant is not eligible for credit as input services have resulted in an immoveable property which is neither excisable nor any service tax is payable on the same. In adjudication the demand of such service tax credit wrongly availed was confirmed. Appellant are in appeal against this impugned order.
3. The Ld. C.A. appearing on behalf of the appellant contended that the use of input services and capital goods has not been disputed in the show cause notice. He further stated that no credit was availed on the steel/cement used in the construction of the mall. Even the credit taken on tiles was recovered. Although, the show cause notice referred to Rule 10 of the Cenvat Credit Rules alleging that credit cannot be transferred to Pune as the provisions of the Rule have not been followed, the adjudication order does not refer to this allegation at all. The definition of input services prior to 1.4.2011 allowed credit of input services used for setting up of premises of output service provider. He relied on Navratna S.G. Highway Prop. Pvt. Ltd. 2012 (28) S.T.R. 166 (Tri.-Ahmd.) and Oberoi Mall Ltd. 2013-TIOL-CESTAT-MUM. According to him Rule 6(5) of Cenvat Credit Rules specifically covered the services of construction during the relevant period and he placed reliance on Cadilla Healthcare Ltd. 2013-TIOL-20AHM-ST. The fact that input service definition was amended from 1.4.2011 to exclude services used for construction, itself implies that such services were covered earlier. The Ld. Counsel further relied on the case of Mundra Ports & Special Economic Zone Ltd. 2015 (39) STR 726 (Guj.).
4. The Ld. AR appearing for Revenue contended that even though the appellants were registered in Mumbai and providing services from there, they availed the accumulated credit for the period 2007 to 2011 in Pune by taking centralized registration in Pune in 2011. As regards the Honble High Court of Karnataka judgment in the case of mPortal India Wireless Solutions Pvt. Ltd. 2012 (27) STR 134 (Kar.) relied upon by the Counsel and which held that registration with the department is not a pre-requisite for claiming the credit, he submitted that this judgment has been appealed against by the Department. He relied on the judgment in the case of Bharti Airtel Ltd. Vs. CCE 2014-TIOL-1452-HC Mum and Vodafone India Ltd vs Commissioner 2015(40) STR 865 (Bom). in which the Honble High Court of Mumbai held that Cenvat Credit is not admissible on the inputs which go into the construction of Telecommunication towers and pre-fabricated buildings. The Ld. AR vehemently contested that there can be no verification of credit of services which were procured during previous 5 years. He placed reliance on the Apex Court judgement in the case of Govt of India vs Citadel Fine Pharmaceuticals 1989(42)ELT 515(SC) which held that whenever there is inordinate delay it would be open to the assessee to contend that it is bad on the ground of delay .
5. We have carefully gone through the facts as well as submissions made by both sides.
The factual position is that in 2011 the appellant declared their intention of availing Cenvat Credit on input services for discharging the service tax liability on the output service namely Renting of Immoveable Property Service. There is no hiding the fact that these services were received over a period of 5 years from 2007 to 2011. And it was only when the construction was ready for renting out they took centralized registration in 2011. In the centralized registration the input services as well as the services to be provided were declared. We find that as held by the Honble High Court of Karnataka in the case of mPortal India Wireless Solutions Pvt. Ltd., there is no provision in the Cenvat Credit Rules which imposes a restriction on availment of credit on input services procured before registration is taken. Even though department has filed an appeal against this judgement, we are bound by judicial discipline to honor the judgment of the High Court.
5.1. The next issue for consideration is whether the input service credit is at all admissible for the construction of a mall which is used for providing Renting of Immoveable Property Service. Here again, we are bound to follow the judgments of the Andhra Pradesh High Court in the case of Sai Sahmita Storages (P) Ltd. 2011 (270) ELT 33 (A.P.) as well as the Tribunal judgment in the case of Navratna Highway (supra). In the present case, we find the appellant availed service tax input of Rs.8.34Crores on following input services:
Air Conditioning Work AMC for Support services Auditor Expenses Banking and Insurance Brick Work Business Development Carpentry Work Civil Work Clearing and Forwarding (Custom duty charges) Consultancy Charges Core Cutting Work Courier Charges Crane Hiring Charges Electrical Work Environmental Clearance Excalator/Elevator Work Excavation and Misc.Work Exhaust System Expension Joint Work External Plastering Work Fagade Work False Celling Work Fire Fitting Work Flooring Work H Frame Installation Hording Charges HVAC Work IBMS Work IT Work Labours Suppliers Lighting Consultant Mandap Dicor Work Masonry Work Marketing and Advertisement Professional Fees Painting Work Plumbing Work POP Work Post Tensioning PT Work Repairing and Maint Security Services Shipment Clearing Agent Steel Rolling Work Structural Work DG Set Installation Rainforcement Expenses Surveyor Telephone and Mobile Expenses Temp Tiolet Installation Work Testing Lab Work Travelling Expenses Wall Panel Fixing Work Water Proofing Work According to Revenue, the services above have not been used for providing Renting of Immoveable Property Service but used for construction of the mall which is not excisable and, therefore credit is not admissible. We find that the High court of Andhra Pradesh in the case of Commr. Of C. Ex., Visakhapatnam-II Vs. Sai Sahmita Storages (P) Ltd. held that-
6.?The only allegation against the assessee is that they claimed CENVAT credit irregularly with reference to cement and TMT bars used in the construction of warehouses through which the storage and warehousing services are provided by the assessee. Section 65(102) of the Finance Act defines storage and warehousing as to include storage and warehousing services for goods including liquids and gases but does not include any service provided for storage of agricultural produce or in service provided by cold storage. As per Section 65(105)(zza), read with Section 66 of the Finance Act, there shall be levied tax on storage and warehousing services at 12% of the value of taxable service. The service tax payable is determined in accordance with Section 67(4) read with the Service Tax Rules, 1994 made in exercise of the powers under Section 94 of the Finance Act. There is no dispute that every provider of taxable service is entitled to claim CENVAT credit in relation to input service. Rule 2(k) and (l) of the Rules are relevant and they read as under.
2.?Definitions.-
(k) input means-
(i)?all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production;
(ii)?all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service;
Explanation 1. - The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.
Explanation 2. - Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer;
(l) 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 upto 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.
7.?A plain reading of both the above definitions would show that, unless excluded, all 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. In Maruti Suzuki Ltd. v. Commissioner of Central Excise, Delhi-III, (2009) 9 SCC 193 = 2009 (240) E.L.T. 641 (S.C.) the Supreme Court laid down as follows.
9.?Coming to the statutory definition of the word input in Rule 2(g) in the CENVAT Credit Rules, 2002, it may be noted that the said definition of the word input can be divided into three parts, namely:
(i) specific part
(ii) inclusive part
(iii) place of use
10.?Coming to the specific part, one finds that the word input is defined to mean all goods, except light diesel oil, high speed diesel oil and petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not. The crucial requirement, therefore, is that all goods used in or in relation to the manufacture of final products qualify as input. This presupposes that the element of manufacture must be present.
8.?Yet again considering the inclusive part of the definition of input, it was held as follows.
All these considerations become relevant only when they are read with the expression used in or in relation to the manufacture of final product in the substantive/specific part of the definition. In each case it has to be established that inputs mentioned in the inclusive part is used in or in relation to the manufacture of final product. It is the functional utility of the said item which would constitute the relevant consideration. Unless and until the said input is used in or in relation to the manufacture of final product within the factory of production, the said item would not become an eligible input. The said expression used in or in relation to the manufacture have many shades and would cover various situations based on the purpose for which the input is used. However, the specified input would become eligible for credit only when used in or in relation to the manufacture of final product. Hydrogen gas used in the manufacture of sodium cyanide is an eligible input, since it has a significant role to play in the manufacturing process and since the final product cannot emerge without the use of gas. Similarly, Heat Transfer Oil used as a heating medium in the manufacture of LAB is an eligible input since it has a persuasive role in the manufacturing process and without its use it is impossible to manufacture the final product. Therefore, none of the categories in the inclusive part of the definition would constitute relevant consideration per se. They become relevant only when the above crucial requirement of being used in or in relation to the manufacture stands complied with. In our view, one has to therefore read the definition in its entirety.
9.?There is no dispute, in these cases, that the assessee used cement and TMT bar for providing storage facility without which storage and warehousing services could not have been provided.
Although the High Court extended the benefit even to steel and cement, we find from the list above that the appellant have mostly taken credit on various inputs services and not on items such as steel and cement. When a query was raised from the Bench regarding entries of credit in respect of invoices raised by entities such as MITC Rolling Mills Pvt. Ltd. and Unity Infra Projects Ltd., we were informed that even these entries related to the service portion and not material portion of the input activity. In any case, as we have noticed above, in Sai Sahmita Storages (P) Ltd. judgment, service tax credit was allowed even on TMT bars and cement. On another query from the Bench whether the input services were received for discharge of service tax liability on Architects service in Mumbai registration the reply was in the negative. Applying the ratio of Sai Sahmita Sorages case case, the service tax credit cannot be denied. Reliance is also placed on the Honble High Court of Gujarat decision in the case of Mundra Ports & Special Economic Zone Ltd. (supra).
5.2 We do find that for the input services for which input service tax credit was availed at Pune, the invoices are addressed to their Bombay office. However this will not be a bar in availing the credit as the appellant had taken centralized registration at Pune before availing the credit and they did not avail credit on any input services in Mumbai as reflected in the relevant ST-3 returns. It was also submitted by them that there is no other project in the company. Therefore we find no reason to deny the credit on this ground.
6. On the apprehension raised of Revenue as to how the verification could have been done in respect of services procured during the previous five years, we find that the appellant had submitted all documents including invoices before issue of show cause notice which enabled the department to make such verification. We may further go on to say that in the show cause notice no doubt has been expressed regarding the actual receipt of the services. As regards the verification of actual use of the input services, we find that the Annexure A to the show cause notice gives details of Cenvat credit availed on inputs and capital goods for the period 1.6.2007 to 31.3.2011 implying that department has conceded that the Cenvat credit was availed for the construction of mall and Renting of Immoveable Property Service.
We have seen the case of Citedal Fine Pharmaceuticals. It was held by the Apex Court that what would be a reasonable period, would depend on the facts of each case..it would be open to the assesse to contend that it is bad on the ground of delay.No hard and fast rules can be laid down in this regard as the determination of the question will depend on the facts of each case. Ld AR is relying on this judgement apparently to say that in the present case there is too much delay in claiming cenvat credit. We have held that the cenvat on the input services is admissible in principle and Honble High Court of Karnataka has held that registeration is not a condition for availing cenvat credit. In this situation, whether the delay is reasonable is the question that needs to be answered. It is noted that the appellant took the credit only when the mall was completed. Prior to that they may not have been sure whether the property is to be sold or rented. Actually 20% of the property was sold out. Therefore they took cenvat credit when the remaining property was ready to be rented out. In these circumstances, in our considered view, the substantial benefit cannot be denied to them and the delay can be ignored especially when there is no violation of legal provisions.
6.1. It is confirmed that the credit was never transferred from Mumbai, it was only availed in Pune after centralized registration was taken. We find that the adjudication order has not given any finding to the effect that the Credit was transferred from Mumbai to Pune without observing the conditions of Rule 10 of the Cenvat Credit Rules as was alleged in the show cause notice. Even on other issues there appears to be a mismatch between the allegations in the show cause notice and the findings in the adjudication order. The show cause notice does not question the availment of Cenvat Credit nor does it say that the documents were not provided before the issue of show cause notice whereas the adjudication order holds that the appellant avoided the submission of the required documents to draw a conclusion as to the correctness of the availment of Cenvat credit. The discussion that the appellant availed 75% abatement in terms of Not. No. 1/2006 has been satisfactorily replied in that they had excluded 20% of the credit on input services and capital goods which pertained to the 20% of the constructed area sold by them. In any case there is no confirmation of demand on this aspect.
7. It is obvious from the definition of input service as it stood prior to 11.4.2011 and after 1.4.2011 that, in the earlier period there was no restriction on use of the input service for construction of building or civil structure used for providing output service. Reliance on the case of Bharti Airtel Ltd. (supra) is misplaced. First, the Honble High Court clearly held that their conclusion is based on the facts and circumstances which fell for their consideration in those appeals. Secondly, because in that case the input services/inputs were used in construction of towers which were held to be immoveable property and hence not excisable. And credit was sought on structural items such as iron and steel. Similarly even the judgement in case of Vodafone does not help the Revenue. In the present case, we find that almost the entire credit has been availed on input services which have been used for providing the output service that is Renting of Immoveable Property Service for which there was no restriction under the clause (i) of the definition of input service. The inclusive part of the definition of input service allowed services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service etc. The words setting up were deleted only from 1.4.2011. Therefore the appellant are eligible for the credit in terms of the definition of input service.
8. In view of the above, the credit is held to be admissible and recovery of the same is set aside. Accordingly, interest and penalty are also set aside.
9. Impugned order is set aside and appeal is allowed.
(Pronounced in court on 2/12/2015) (Ramesh Nair) Member (Judicial) (P.S.Pruthi) Member (Technical) SM.
14Appeal No. ST/87806/2013-Mum