Custom, Excise & Service Tax Tribunal
Bharti Realty Limited vs Delhi Iii on 9 May, 2023
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. 1
Service Tax Appeal No. 51789 of 2017
(Arising out of Order-in-Original No. DLI-SVTAX-003-COM-100-16-17
dated 20.06.2017 issued under C. No. DL-
III/ST/IV/16/Hqrs/Adjn./Bharti/194/2015/1270 dated 21.06.2017 passed by
Commissioner of Service Tax, Delhi-III, EIL Annex Building, 5th Floor, Bhikaji
Cama Place, R.K. Puram, New Delhi 110066)
M/s Bharti Reality Ltd. ...... Appellant
3rd Floor, World Mark 2, Asset 8,
NH-8, Aerocity
New Delhi-110037
VERSUS
Principal Commissioner of Central Goods
And Service Tax & Central Excise,
Delhi South ...... Respondent
2nd and 3rd Floor, EIL Annexe Building, Bhikaji Cama Place, New Delhi-110066 APPEARANCE:
Shri B.L. Narasimhan & Shri Kunal Agarwal, Advocate for the Appellant Shri Rajeev Kapoor, Authorized Representative of the Department CORAM :
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MS. HEMAMBIKA R PRIYA, MEMBER (TECHNICAL) FINAL ORDER NO._50642/2023_ DATE OF HEARING: May 09, 2023 JUSTICE DILIP GUPTA M/s Bharti Reality Ltd.1 has challenged the order dated 20.06.2017 passed by the Commissioner denying CENVAT credit of Rs. 4,45,82,465/- and ordering for recovery of the same under
1. the appellant 2 ST/51789/2017 rule 14 of the CENVAT Credit Rules 20042. The Commissioner has also ordered for recovery of interest and has imposed penalty.
2. The issue raised in this appeal relates to denial of CENVAT credit availed on „input services‟ used for construction of buildings, from where „renting of immovable property‟ service is provided by the appellant for the reason that the same would result in creation of immovable property which is neither „goods‟ nor „services‟.
3. The appellant, during the relevant period, constructed buildings using various input services and thereafter, rented out the space therein. According to the appellant this would fall under „renting of immovable property‟ service and it has, accordingly, paid service tax on this service.
4. During the period in dispute from 2010-11 to 2013-14, the appellant availed CENVAT credit on such input services used in the construction of the buildings which were rented afterwards.
5. Earlier, a show cause notice dated 17.04.2012 was issued to the appellant for the period from 01.04.2008 to 31.03.2011 for denial and recovery of CENVAT credit availed on various input, inputs services and capital good for the reason that such input, input services and capital goods result in creation of immovable property which would neither be goods nor services. It is in continuation of the said show cause notice dated 17.04.2012 that the present show cause notice dated 16.10.2015 was issued to the appellant under section 73(1)A of the Finance Act, 19943. The show cause notice specifically mentions that the allegations would be same as contained in the earlier show cause notice. The impugned order dated 20.06.2017 has confirmed the denial of
2. the 2004 Rules
3. the Finance Act 3 ST/51789/2017 CENVAT credit on grounds similar to the allegations made in the earlier show cause notice: In fact, the impugned order dated 20.06.2017 is to a large extent similar to the order dated 31.03.2016 that adjudicated the earlier show cause notice dated 17.04.2012.
6. It needs to be noted that the order dated 31.03.2016 passed against the appellant for the period 01.04.2008 to 31.03.2011 was assailed by the appellant before the Tribunal in Service Tax Appeal No. 52469 of 2016, which appeal was allowed on 09.05.2022 by a Division Bench of the Tribunal in M/s Bharti Reality Limited Vs. Commissioner of Service Tax, Delhi III4.
7. The submission advanced by Shri. B.L. Narasimhan, learned counsel for the appellant assisted by Shri Kunal Agarwal is that the order dated 20.06.2017 passed by the Commissioner should be set aside for the reasons enumerated in the aforesaid order dated 09.05.2022 passed by the Tribunal in the appellant‟s own case for the earlier period.
8. Shri Rajeev Kapoor, learned authorized representative appearing for the department has, however, supported the impugned order and has contended that it does not call for any interference in this appeal.
9. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered.
10. The appellant has used various input services like (i) management or business consultant, (ii) interior decorator‟s services, (iii) real estate agent services, (iv) consulting
4. 2022 (5) 569-CESTAT, New Delhi 4 ST/51789/2017 engineering, (v) business support services (vi) advertising agency services (vii) business & exhibition services (viii) security agency services, (ix) survey and map-making services, (x) technical testing and analysis services, (xi) management, maintenance or repair and (xii) technical inspection and certification for the construction of buildings which have been rented afterwards.
11. The contention of the learned counsel for the appellant is that these input services have been used by the appellant for the provision of output renting services, since the appellant would not be in a position to provide such output services without using these input services. These input services have, therefore, a direct nexus and are used for provision of renting services and thus, the appellant is eligible to avail CENVAT credit.
12. This precise issue was considered by a Division Bench of the Tribunal in Bharti Reality Ltd. for the earlier period and it was held that the appellant would be entitled to avail CENVAT credit and relevant portions of the order are reproduced below:-
" 9. The short question to be answered is whether inputs, capital goods and input services which are used for construction of buildings and structures, which are then used for providing services are eligible for CENVAT credit or not.
10. The case of the Revenue is that neither these inputs and capital goods nor the input services are directly used for providing services but they are used for construction of immovable property which is neither a good nor a service. Therefore, the inputs, capital goods and input services which go into creation of such an immovable property does not qualify as input, capital goods service or input service under the CENVAT Credit Rules, 2004.
11. The case of the appellant is that the immovable property is a structure which comes in the process of providing taxable service. It is not being constructed for its own sake but is being built with the intention of providing taxable service. It has been used for providing taxable service and service tax has been paid on such taxable service. Therefore, the appellants are entitled to CENVAT credit as input, capital goods and input services are directly relatable to the taxable service which it is providing. Rendering taxable service is impossible where the structure comes into existence and the structure will come into existence only with the help of inputs, capital goods and input services. The mere fact that 5 ST/51789/2017 the structure is attached to the earth does not dilute the fact that it is being used for providing a taxable service.
12. We find that this issue was addressed by various High Courts. In Commissioner of Central Excise, Visakhapatnam vs. Sai Samhita Pvt. Ltd.5, the High Court of Andhra Pradesh has decided that CENVAT credit is admissible on cement and TMT bars for construction of warehouses by M/s Sai Samhita who were providing storage and warehousing services.
13. The judgment of the Andhra Pradesh High Court in Sai Samhita was referred to by the Gujarat High Court in Mudra Port and CENVAT credit was allowed on the inputs used for construction of jetty.
14. In Vandana Global Limited, the High Court of Chhattisgarh disposed of the bunch of appeals reversing the order of the Larger Bench of this Tribunal. The question framed by the Chhattisgarh High Court were as follows:
4. In the light of the contents of the impugned order of the Tribunal and submissions of the Assessee and the Revenue following substantial questions of law are formulated for consideration:
(A) Whether the terms „capital goods‟ excluded the structures embedded in earth?
(B) Whether the goods like angles, joists, beams, bars, plates, which go into fabrication of such structure are not to be treated as „input‟ used in relation to their final products as inputs for capital goods, or none of the above?
(C) is the amendment brought in CENVAT Credit Rules, 2004 as per Rule 2 of the CENVAT (Amendment) Rules, 2009 retrospective in nature considering is it clarificatory to be applied to all matters which arise before 07.07.2009, the date of commencement of the CENVAT (Amendment) Rules, 2009: hereinafter referred to as "Amendment Rules".
15. All the questions were answered in favour of the assessee and against the Revenue. In the case of Vodafone India Limited vs. Commissioner of Central Excise, Mumbai II30 the Bombay High Court held that no CENVAT credit is admissible on the inputs used in construction of the towers. Jurisdictional High Court of this Bench, viz, Delhi High Court has, in the case of Vodafone, on the other hand, held that CENVAT credit is admissible on the inputs and input services used for construction of the towers.
16. The submission of the Revenue is that the appeals filed before the Supreme Court in these matters are pending. We, however, find that there is no stay on the decision of jurisdictional High Court in Vodafone Limited. The decision of the Delhi High Court is binding on this Bench.
17. We also find substance in the submission of the appellants on merits as it is undisputed that the appellants are engaged in providing renting of immovable property service and all the inputs, capital goods and input services which are in dispute were used for construction of buildings which were then rented out and service tax was paid on the renting of immovable property service.
5. 2011 (23) STR 341 (AP) 6 ST/51789/2017
18. The only question which remains is whether, by virtue of the fact that the building which emerges is neither a good nor a service, the appellant can be denied CENVAT credit. The jurisdictional Delhi High Court in Vodafone has held in favour of the appellant.
19. Thus, the appellants are entitled to the disputed CENVAT credit. Consequently, the impugned orders seeking to deny and recover CENVAT credit along with interest and seeking to the impose penalties cannot be sustained. Consequently, both the appeals are allowed and impugned orders are set aside with consequential relief, if any, to the appellants."
(emphasis supplied)
13. In view of the aforesaid decision of the Tribunal, the appellant would be eligible to avail CENVAT credit on „input services‟ used for provision of renting services.
14. Learned counsel for the appellant has, however, pointed out a relevant fact which has not been taken note of either in the show cause notice or in the impugned order passed by the Commissioner. This concerns the amendment made on 01.04.2011 in rule 2(l) of the 2004 Rules, which rule defines „input service‟.
15. Prior to 01.04.2011, rule 2(l) of the 2004 Rules read as follows:-
" 2(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; "
16. After the amendment, rule 2(l) reads as follows-
"2 (l) "input service" means any service, -
(i) used by a provider of output service for providing an output service; or 7 ST/51789/2017
(ii) used by a 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 modernisation, 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, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal;
but excludes -
(A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for-
(a) construction or execution of works contract of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or (B) services provided by way of renting of a motor vehicle, in so far as they relate to a motor vehicle which is not a capital goods; or (BA) service of general insurance business, servicing, repair and maintenance, in so far as they relate to a motor vehicle which is not a capital goods, except when used by -
(a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such person; or
(b) an insurance company in respect of a motor vehicle insured or reinsured by such person; or
(c) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee;"
17. Learned counsel for the appellant pointed out that for commercial or industrial consideration, erection commissioning or installation and works contract service, the appellant availed CENVAT credit of service tax paid on works contract service prior to 01.04.2011 as the services were used for construction of buildings specifically given on rent, but the appellant, in view of the amendment made in rule 2(l) of the 2004 rules on 01.04.2022, did not avail CENVAT credit as these are services covered under the inclusive clause.
8
ST/51789/2017
18. The Commissioner has placed reliance upon a Larger Bench decision of the Tribunal in Vandana Global Vs. Commissioner of Central Excise and Customs, Raipur (Chhattisgarh)6, which decision has been set aside by the Chhattisgarh High Court and the decision of the Larger Bench of the Tribunal. This is clear from paragraph 14 of the decision of the Tribunal in the appellant‟s own case in Bharti Reality.
19. In view of the aforesaid discussion, the order dated 20.06.2017 passed by the Commissioner deserves to be set aside and is set aside and the appeal is allowed.
(Order dictated and pronounced in the Open Court) (JUSTICE DILIP GUPTA) PRESIDENT (HEMAMBIKA R PRIYA) MEMBER (TECHNICAL) Rekha
6. 2010 (253) ELT 440 (Tri.-LB)