Tribunal allows credit for setting up Research Lab, overturns disallowance decision

The Tribunal found that the credit on input services for setting up a Research Laboratory premises was wrongly disallowed. The appellant had availed services before April 2011 when the definition of input services covered such activities. The denial of credit contradicted the definition of input services, especially when the premises were used for providing the output service. Therefore, the impugned order disallowing credit was set aside, and the appeal was allowed with any consequential reliefs.

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Issues: Disallowance of credit on input services for setting up Research Laboratory premises.

In this case, the appellant, a service provider, availed services of architects, project management consultants, and civil contractors for setting up a Research Laboratory. The department alleged irregular availment of credit on these services, leading to a demand of Rs. 37,40,313. The Commissioner confirmed the demand along with interest and imposed a penalty. The appellant contended that the services were availed before April 2011 when the definition of input services included setting up of factory/premises of the output service provider. They relied on a circular clarifying credit eligibility before April 2011 and a judgment by CESTAT, Mumbai. The Assistant Commissioner reiterated the findings in the impugned order.

Upon review, it was found that the disputed services were received and credit was taken before April 2011. The Board's circular clarified that credit is eligible if services were availed before April 2011, when the definition of input services covered setting up of factory/premises. The Tribunal highlighted that denying credit for services related to setting up the premises of the output service provider contradicted the definition of input services. Referring to a previous judgment, it emphasized that if the premises were used for providing the output service, credit for services used in setting up those premises must be allowed.

Consequently, it was concluded that the credit was wrongly disallowed. The impugned order disallowing credit was set aside, and the appeal was allowed with any consequential reliefs.

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