2013 (12) TMI 46 - AT - Service Tax

Tribunal grants refund for service tax on maintenance charges & rent citing nexus between input & output services

The Tribunal allowed the appellant's refund claims for unutilized CENVAT credit on service tax paid for maintenance charges and rent, finding a direct ... Refund of unutilized CENVAT credit - Rule 5 of CENVAT Credit Rules read with Notification No.5/2006-CE (NT) dated 14.3.2006 - Rejection of refund claim - whether appellant is eligible for the refund of the service tax paid by the service provider and utilized by him for rendering output services - Held that:- car parking area and other maintenance charges levied by the apartment is in respect of the space rented by the appellant for rendering his output services. If there is service tax liability which has been discharged by the service tax provider and collected from the appellant, and if the premises are used by the appellant for rendering output services - appellant being registered with the authorities under STP, the appellants were admittedly rendering their output services from the premises which have been rented to them i.e., ground floor, first floor and second floor. Non-inclusion of the ground floor in the centralized registration certificate may be at the most curable defect which was subsequently cured. Be that as it may, it is not disputed that rent paid for such ground floor was also taxed under the category of renting-out of immovable property by the owner. It is seen from the records that the appellant has paid such service tax to the owner and hence in my view is eligible to avail the CENVT credit of the service tax paid on the rent for the ground floor. When the appellant pays service tax to service provider and has got documentary evidence which is as per the provisions of the Finance Act, 1994 and the Rules made thereunder, such CENVAT credit cannot be denied. Secondly, though the appellant has entered into an agreement with Mr. Mohammed Oomer Sait for renting of the entire premises, subsequently on written request of the owner, due to presumably his own tax problem, had directed the appellant to issue two different cheques. The issuance of two different rent cheques, one in the name of Mr. Mohammed Oomer Sait and Mrs. Tahseen Oomer Sait would not mean that the appellant is not paying any rent to the owner of the premises. In my view, point raised by the Revenue in denying the refund is hyper technical. This view is unsustainable and liable to be set aside, more so when it is undisputed that Mrs. Tahseen Oomer Sait has paid the service tax and indicated on the invoice - Decided in favour of assessee. Issues Involved:1. Eligibility for refund of unutilized CENVAT credit.2. Nexus between input services and output services for CENVAT credit.3. Validity of CENVAT credit on service tax paid for maintenance charges and rent.4. Legal authority of the revisionary authority to review an order under appeal.Detailed Analysis:1. Eligibility for Refund of Unutilized CENVAT Credit:The appellant filed refund claims for the period July 2008 to December 2008 for unutilized CENVAT credit under Rule 5 of the CENVAT Credit Rules, read with Notification No. 5/2006-CE (NT) dated 14.3.2006. The claims were based on the service tax paid on input services used for providing output services. The adjudicating authority partially allowed the claims, which led to appeals before the first appellate authority and subsequently to the Tribunal.2. Nexus Between Input Services and Output Services for CENVAT Credit:The primary contention was whether the service tax paid on maintenance charges, rent for the ground floor, and rent paid to the owner's wife had a direct nexus with the output services provided by the appellant. The appellant argued that the rented premises, including the ground floor, were used for providing output services, and hence, the service tax paid should be eligible for CENVAT credit. The revisionary authority, however, questioned the nexus and denied the refund claims.3. Validity of CENVAT Credit on Service Tax Paid for Maintenance Charges and Rent:The Tribunal found that the appellant was indeed using the rented premises, including the ground floor, for providing output services. The maintenance charges paid for the car parking and other facilities were part of the rental agreement and were necessary for the operation of the business. Therefore, the service tax paid on these charges was eligible for CENVAT credit. Regarding the rent paid to the owner's wife, the Tribunal noted that the invoices issued were compliant with the Service Tax Rules, and the service tax was duly paid, making the appellant eligible for CENVAT credit.4. Legal Authority of the Revisionary Authority to Review an Order Under Appeal:The appellant raised a legal point questioning the revisionary authority's power to review an order that was already under appeal before the first appellate authority. The Tribunal referred to the decision of the Hon'ble High Court of Punjab and Haryana in the case of Commissioner of Central Excise vs. Shiva Builders, which held that the revisionary authority could not exercise jurisdiction under Section 84(4) of the Finance Act, 1994, if an appeal was pending. The Tribunal found this decision directly applicable and supportive of the appellant's case.Conclusion:The Tribunal concluded that the appellant was eligible for the refund of the service tax paid on maintenance charges and rent. It also held that the revisionary authority's orders were unsustainable as they were passed while an appeal was pending before the first appellate authority. Consequently, the impugned orders were set aside, and the appeals were allowed with consequential relief.Judgment:The impugned orders are set aside, and the appeals are allowed with consequential relief, if any. (Pronounced in Open Court on 05.09.2013.)