Custom, Excise & Service Tax Tribunal
Regency Park Property Management ... vs Commissioner, Service Tax-Delhi on 29 January, 2020
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. - I
Service Tax Appeal No. 53586 of 2014 [DB]
[Arising out of Order-in-Original No.71-72/ST/SRB/2014 dated 1 April, 2014 passed by
the Commissioner of Service Tax (Adjudication), New Delhi]
M/s. Regency Park Property
Management Services Pvt. Ltd. ...Appellant
(Now M/s. DLF Emporio Ltd.),
9th Floor, DLF Centre, Sansad Marg,
New Delhi - 110001.
VERSUS
Commissioner, Service Tax, Delhi ...Respondent
17-B, IAEA House, M.G. Marg, Indraprastha Estate, New Delhi - 110002.
APPEARANCE:
Shri B.L. Narasimhan & Ms. Neha Chaudhary, Advocates for the Appellant Shri Radhe Tallo, Authorised Representative for the Respondent Coram: HON‟BLE MR. JUSTICE DILIP GUPTA, PRESIDENT HON‟BLE MR.C.L. MAHAR, MEMBER (TECHNICAL) DATE OF HEARING/ DECISION : 29.01.2020 FINAL ORDER No. 50292/2020 JUSTICE DILIP GUPTA:
This appeal seeks the quashing of the order dated 1 April 2014 passed by the Commissioner (Adjudication)1 by which CENVAT Credit availed by the Appellant for providing the output service of „renting of immovable property‟ has been held to be inadmissible and an order for recovery has been made in terms of rule 14 of the CENVAT Credit Rules, 2 2004 . The Commissioner has also ordered for recovery of interest and penalty has also been imposed.
____________________
1. The Commissioner
2. 2004 Rules 2 Service Tax Appeal No. 53586 of 2014 [DB]
2. The period of dispute in the first show cause notice dated 15 March, 2012 is from 1 April, 2007 to 31 March, 2010, and from 1 April 2011 to 31 March, 2012 in the second show cause notice dated 16 April, 2013. The Appellant constructed a commercial Mall in the name of „DLF Emporio Mall‟ in Delhi using various inputs, input services and capital goods and thereafter rented out space in the aforesaid constructed Mall for commercial purposes, which activity would be covered under "renting of 3 immovable property" service as defined under section 65 (19a) of the Finance Act, 19944. The appellant paid service tax on this RIP service. The appellant also availed CENVAT Credit on inputs, input services and capital goods used in the construction of the Mall and utilized the same for payment of service tax on RIP services provided by it.
3. However, two show cause notices dated 15 March, 2012 and 16 April, 2013 were issued to the appellant mentioning that it appeared that CENVAT Credit was not available on the inputs, input services and capital goods used in the construction of the Mall since service tax was not leviable on it.
4. The appellant filed detailed replies dated 30 April, 2013 and 11 December, 2013 to the aforesaid two show cause notices and denied the allegations made therein.
_____________________
3. RIP
4. the Finance Act 3 Service Tax Appeal No. 53586 of 2014 [DB]
5. The Commissioner did not accept the contentions raised by the appellant in reply to the show cause notices and concluded that the appellant was not entitled to avail CENVAT Credit on inputs, input services and capital goods used in the construction of the immovable property. The conclusions of the Commissioner are reproduced below:-
"22.7 I find that the inputs, input services & capital goods on which CENVAT Credit has been availed by the noticee, have been used in respect of the erection or construction of the immovable property of the noticee. It is the right to use the immovable property which is made leviable to service tax under „Renting of Immovable Property Services‟. I agree that an immovable property is neither subjected to Central Excise Duty nor to Service Tax. Since immovable property is neither a „service‟ nor „goods‟, input credit cannot be taken against immovable property. I therefore conclude that the noticee are not eligible to avail the CENVAT Credit of inputs, input services & capital goods used for the immovable property and hence the CENVAT credit so availed by the Noticee as detailed in the impugned SCNs is required to be disallowed to them in terms of Rule 14 of the CENVAT Credit Rules, 2004.
Xxxxxxxxxxxxxxxxxxxxxxxx 22.9 The immovable property for which the noticee have availed CENVAT Credit is neither a „service‟ nor „goods‟. In this specific case, the inputs, input services and capital goods on which the demand for the CENVAT Credit utilized has been made, have been used for the construction of a building. The building on completion, does not suffer either Central Excise duty or Service Tax since the building does not come under the ambit of Central Excise or the Service Tax Law. On the other hand, the services of "Renting of Immovable Property" which the noticee rendered subsequently comes in the ambit of the service tax and the input/input services which are used for construction of the immovable property does not figure in the above eligible categories for utilization of CENVAT Credit. I therefore hold that the noticee have wrongly utilized the input credit as detailed in impugned SCNs for discharging service tax liability on 4 Service Tax Appeal No. 53586 of 2014 [DB] the „Renting of Immovable Property Services‟ in violation of Rule 3 of the CENVAT Credit Rules, 2004. The said CENVAT Credit wrongly utilized for discharging service tax liability on the „Renting of Immovable Property Services‟ is required to be disallowed to them in terms of Rule 14 of the CENVAT Credit Rules, 2004 read with Section 73 of the Finance Act, 1994 & equal amount required to be recovered from them under Section 73 of the Act ibid."
Xxxxxxxxxxxxxxxxxxxxxxxxxxx 23.2 From the foregoing, it appears that there is no nexus between the impugned inputs/ input services and the output services provided by the noticee as these inputs and input services were used for the construction of commercial building and not for the Renting of Immovable Property Services provided by the Noticee.
Xxxxxxxxxxxxxxxxxxxxxxxxxxxx 23.3.............................In the subject case, the building did not suffer any central excise duty or service tax. The question of utilization of inputs, input services and capital goods which went into the construction of the building ended with the completion of the construction of the building. The activity of construction of the building is independent from the activity of "Renting out the said premises". Therefore, the duties paid on the inputs, capital goods, input services used in the construction of the building cannot be accumulated and used in discharging the service tax liability on the renting of immovable property services by the noticee. The renting out of the premises does not automatically follow from the construction of the building.
(emphasis supplied)
6. The Commissioner also noted the amendment that was made by Notification dated 1 March, 2011 that was to be effective from 1 April, 2011 in the definition of "input" and "input services" and concluded that for this reason also the appellant would not be entitled to claim CENVAT Credit.
5
Service Tax Appeal No. 53586 of 2014 [DB]
7. Shri B.L. Narasimhan, learned Counsel appearing for the appellant submitted that the appellant had used various inputs, input services and capital goods for the construction of a commercial Mall and these inputs, input services and capital goods have, therefore, been used by the appellant for the provision of its output service, namely RIP since without these inputs, input services and capital goods, the appellant would not have been able to construct the Mall and rent it out for commercial purposes. Learned Counsel, therefore, submitted that the inputs, input services and capital goods used by the appellant have a direct nexus with the provision of output service and CENVAT Credit was correctly availed by the appellant. In support of this submission, learned Counsel placed reliance upon the judgement of the Andhra Pradesh High Court in Commissioner of Central Excise, Vishakhapatnam-II versus Sai Sahmita Storages (P) Ltd.5 and the judgement of the Madras High Court in Commissioner of GST & Central Excise, Chennai-40 vs. M/s.Dymos India Automotive Pvt. Ltd.6 as also to the judgment of the Delhi High Court in Vodafone Mobile Services Ltd. vs. Commissioner of Service Tax, Delhi7. Learned Counsel also placed reliance upon the following decisions of this Tribunal:-
8
1. DB Mall Pvt. Ltd. vs. CGST, C.E. & C.C., Bhopal
2. DLF Limited vs. Commissioner, C.E. & S.T., Delhi 9.
3. Galaxy Mercantiles Limited vs. Commissioner, Central Excise & Service Tax, Noida 10.
____________________
5. 2011 (23) S.T.R. 241 (A.P.)
6. 2018 - TIOL - 1947- HC - MAD - ST
7. 2018 - TIOL - 2409 - HC - DEL - ST
8. Final Order dated 20.04.2018 in Service Tax Appeal No.57043 of 2013
9. Final Order dated 22.03.2018 in Service Tax Appeal No.03089 of 2012
10. Final Order dated 08.03.2018 in Service Tax Appeal No. 3088 of 2012 6 Service Tax Appeal No. 53586 of 2014 [DB]
4. DLF Cyber City Developers Limited vs. Commissioner, Central Excise & 11 CGST, Gurugram .
5. Navaratna S.G. Highway Prop. Private Limited vs. Commissioner of Service 12 Tax, Ahmedabad .13
6. Ruchi Malls Pvt. Ltd. vs. Commissioner of Central Excise, Delhi-II .14
7. Oberoi Mall Limited vs. Commissioner of Service Tax, Mumbai-II .
8. Vamona Developers Private Limited vs. Commissioner of Customs, Central 15 Excise & Service Tax, Pune-III
9. Ascendas IT Park (Chennai) Limited vs. Commissioner of Service Tax, 16 Chennai .
8. Learned Counsel also submitted that the amendment made in the definition of "input" and "input services" with effect from 1 April, 2011 would not be applicable in the present case because though the disputed period may be from 1 April, 2011 to 31 March, 2012, but the services were received by the appellant prior to 1 April, 2011 as a result of which, the appellant would be entitled to avail CENVAT Credit. In support of this contention, learned Counsel has placed reliance upon a Circular dated 29 17 April, 2011 issued by the Central Board of Excise and Customs , wherein it has been clarified that the CENVAT Credit on input services will be available if the service had been provided before 1 April, 2011. ______________________
11. Final Order dated 03.01.2018 in Service Tax Appeal No.60752 of 2017.
12. 2012 (28) S.T.R. 166 (Tri.-Ahmd.)
13. 2018-TIOL-1991-CESTAT-DEL
14. 2017 (47) S.T.R. 292 (Tri.-Mum.)
15. 2016 (42) S.T.R. 277 (Tri.- Mum.)
16. 2018-VIL-55-CESTAT-CHE-ST
17. CBEC 7 Service Tax Appeal No. 53586 of 2014 [DB]
9. Dr. Radhe Tallo learned Authorised Representative of the Department has, however, supported the impugned order and has submitted that the findings recorded therein are in conformity with the provisions of the 2004 Rules and do not call for any interference in this appeal.
10. The submissions advanced by learned Counsel for the appellant and the learned Authorised Representative of the Department have been considered.
11. The issue that arises for consideration in this appeal is as to whether the appellant was entitled to avail CENVAT Credit on inputs, input services and capital goods used in the construction of the Hall for providing RIP service.
12. In order to appreciate the issue, it would be appropriate to refer to the relevant provisions of the 2004 Rules.
13. "Capital goods", "inputs" and "input services" have been defined in sub-clauses (a), (k) and (l) respectively of rule 2 and are reproduced below:-
(a) "capital goods" means:-
(A (A) the following goods, namely:-
)
(i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90,
heading No. 68.05 grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Excise Tariff Act;
(ii) pollution control equipment;
(iii) components, spares and accessories of the goods specified at (i) and (ii);
(iv) moulds and dies, jigs and fixtures;
(v) refractories and refractory materials;
(vi) tubes and pipes and fittings thereof; and
(vii) storage tank, used-
)
(1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office; or (2) for providing output service;
(B))motor vehicle registered in the name of provider of output service for 8 Service Tax Appeal No. 53586 of 2014 [DB] providing taxable service as specified in sub-clauses (f), (n), (o), (zr), (zzp), (zzt) and (zzw) of clause (105) of section 65 of the Finance Act;
**** **** ****
(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; but shall not include cement, angles, channels, Centrally Twisted Deform bar (CTD) or Thermo Mechanically Treated bar (TMT) and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods;
(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;
14. Rule 3 of the 2004 Rules deals with CENVAT Credit. The portion relevant for the purposes of this appeal provides that a provider of taxable service shall be allowed to take credit to be called CENVAT Credit on any input service by the provider of output service. Sub-rule (4) of rule 3 9 Service Tax Appeal No. 53586 of 2014 [DB] provides that the CENVAT Credit may be utilized for payment of service tax on any output service.
15. The contention of the appellant is that inputs, input services and capital goods were used by the appellant for the construction of a commercial Mall and subsequently the space in the Mall was rented out for commercial purposes. The Commissioner has denied CENVAT Credit to the appellant for the reason that the activity of construction of the building is independent from the activity of renting out the premises and as the inputs, input services and capital goods on which CENVAT Credit has been availed by the appellant had been used for construction of the immovable property on which no service tax was leviable, the appellant would not be entitled to avail CENVAT Credit on such input, input service and capital goods used for the construction of the immovable property.
16. The issue as to whether the CENVAT Credit availed for the construction of a Mall and subsequent renting has been considered time and again by the High Courts and the Tribunal.
17. The Madras High Court in Dymos India Automotive examined whether CENVAT Credit on „commercial or industrial construction‟ service can be utilized for payment of service tax on „renting of immovable property‟ and observed as follows:-
"10. The Tribunal also referred to the decision in the case of CCE, Coimbatore Vs. Lakshmi Technology & Engineering Indus Ltd. [reported in (2011) 23 STR 265 (Tri.-Chennai)] and also the decision in the case of Navaratna S.G. Highway Property Private Limited Vs. CST [reported in (2012) 28 STR 166 (Tri.-Ahmd.)] and held that without construction of the building, the renting of immovable property services cannot be provided and that therefore, construction service is an eligible service for credit for providing output service of renting of immovable property.
11. In our considered view, the conclusion of the Tribunal is well founded, as construction service is an eligible service for credit for providing output service of renting of immovable property and without 10 Service Tax Appeal No. 53586 of 2014 [DB] construction of the building, the renting of immovable property cannot be provided. We are also of the opinion that there is no error in the decision taken by the Tribunal."
18. The aforesaid decision of the Madras High Court makes reference to the decision of the Tribunal in Navaratna S.G. Highway. The said decision in Navaratna S.G. Highway, after placing reliance upon a decision of the Andhra Pradesh High Court in Sai Sahmita Storages, observed as follows:-
"3.2 The definition of „inputs‟ is limited to the definition of „input services‟ as can be seen from the definition given above. Credit of duty paid on inputs is available when the inputs are used for providing an „output service‟. Therefore, there is a need to say that the inputs have been used for providing an „output service‟. In the case of „input service‟, the definition includes input services used by a provider of taxable service for providing an output service. Therefore the definition of input and input service are pari materia as far as the service providers are concerned. That being the position, the decision of the Hon‟ble High Court of Andhra Pradesh would be applicable to the present case. In that case also, the Hon‟ble High Court took the view that without use of cement and TMT bars for construction of warehouse assessee could not have provided „storage and warehousing service‟. In this case also, without utilizing the service, mall could not have been constructed and therefore the renting of immovable property would not have been possible. The issue involved is squarely covered by the decision of the Hon‟ble High Court of Andhra Pradesh. Since the service tax demand itself is not sustainable, the question of imposition of penalty does not arise. The appeal is allowed with consequential relief to the appellants."
19. At this stage it will also be appropriate to refer to a decision of the Delhi High Court in Vodafone Mobile Services. The High Court examined whether emergence of immovable structure at intermediate stage is a criterion for denial of CENVAT Credit. After referring to the decision of the Andhra Pradesh High Court in Sai Sahmita Storages, the Delhi High Court observed:-
"71. Sai Sahmita Storages (P) Limited, is, in our opinion, a decision that held that a plain reading of the definition of Rule 2(k) would demonstrate that 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.11
Service Tax Appeal No. 53586 of 2014 [DB]
72. In the present case, it is not in dispute that the appellant is a taxable service provider providing passive telecommunication service. Therefore, the assessee is entitled for input credit on the weight of judicial authority discussed above. It is also clear that several High Courts in different contexts have taken a view that credit of excise duty and service tax paid would be available irrespective of the fact that inputs and input services were used for creation of an immovable property at the intermediate stage, if it was ultimately used in relation to provision of output service or manufacturing of final products."
20. In view of the aforesaid decisions of the High Courts, there is no manner of doubt that CENVAT Credit availed by the appellant on inputs, inputs services and capital goods service used for construction of the Mall, which was ultimately let out could not have been denied to the appellant. The findings to the contrary recorded by the Commissioner cannot be sustained and are, accordingly, set aside.
21. The only issue that now remains to be decided is whether the amendment made with effect from 1 April, 2011 in the definition of "input service" will be applicable to the facts of the present case since the period of dispute in the second show cause notice is from 1 April, 2011 to 31 March, 2012. The second show cause notice dated 16 April, 2013 makes no mention of the amendment made in the definition of „input service‟, much less mentioning that the „input services‟ have been received by the appellant after 1 April, 2011. In reply to the show cause notice, the appellant stated that in view of the clarification dated 29 April, 2011 issued by CBEC, „input services‟ received prior to 1 April, 2011 were admissible for CENVAT Credit. It has also been stated that the „input services‟ in question were received by the appellant before 1 April, 2011 in the grounds of appeal also. The appellant has specifically come out with a case that the CENVAT Credit availed by the appellant for the period 2011- 12 pertains to input services received by the appellant prior to 1 April, 2011. In this connection, the relevant pages of the CENVAT Register for the period 2011-12 have also been enclosed.
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Service Tax Appeal No. 53586 of 2014 [DB]
22. The Commissioner has not examined this aspect and has merely observed that in view of the amendment made in the definition of „input service‟ with effect from 1 April, 2011, the appellant would not be entitled to avail CENVAT Credit.
23. It clearly transpires from the reply filed by the appellant as also from the documents enclosed in the appeal that even though the period in dispute may be from 1 April, 2011 to 31 March, 2012, but the „input services‟ were received by the appellant prior to 1 April, 2011. The clarification contained in the Circular dated 29 April, 2011, on which reliance has been placed by the learned Counsel for the appellant, is reproduced below:-
S.No. Issue Clarification
Is the credit available on The credit on such service shall
12 services received before be available if its provision had
01.04.2011 on which credit is been completed before
not allowed now? e.g. rent-a- 01.04.2011.
cab service
24. CENVAT Credit could not have been denied to the appellant for this reason.
25. Thus, for all the reasons stated above, it is not possible to sustain the impugned order dated 1 April, 2014. It is, accordingly, set aside and the appeal is allowed.
[Dictated and pronounced in the open Court] (JUSTICE DILIP GUPTA) PRESIDENT (C.L. MAHAR) MEMBER (TECHNICAL) Anita