Tribunal allows CENVAT credit on input services for rented premises

The tribunal ruled in favor of the appellant, holding that they were entitled to avail CENVAT credit on input services used for constructing premises that were subsequently rented out. The tribunal set aside the denial of CENVAT credit, emphasizing that the services were utilized to provide taxable output services. It was determined that the utilization of CENVAT credit availed before 01.04.2011 was permissible, supported by judicial precedents and relevant legal provisions. The appeal was allowed with consequential relief granted to the appellant.

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Issues Involved:
1. Denial of CENVAT credit on input/input services used for construction.
2. Applicability of Rule 2(k) and Rule 2(l) of the CENVAT Credit Rules, 2004.
3. Impact of premises being considered immovable property on CENVAT credit eligibility.
4. Utilization of CENVAT credit availed prior to 01.04.2011 after 01.04.2011.
5. Relevance of judicial precedents and CBEC circulars.

Detailed Analysis:

1. Denial of CENVAT credit on input/input services used for construction:
The appellant, engaged in construction activities, availed CENVAT credit on input services used for constructing premises before 01.04.2011 but utilized the credit between 01.04.2011 and 31.03.2012 for paying service tax under the category of Renting of Immovable Service. The revenue issued a show cause notice denying CENVAT credit on the grounds that the services were used for constructing immovable property, which does not qualify as goods or capital goods.

2. Applicability of Rule 2(k) and Rule 2(l) of the CENVAT Credit Rules, 2004:
The appellant argued that according to Rule 2(k) and Rule 2(l) of the CENVAT Credit Rules, 2004, any input used for providing output service qualifies for CENVAT credit. The appellant cited the Madras High Court's decision in Dalmia Cements (Bharat) Ltd. and the Andhra Pradesh High Court's decision in Sai Sahmita Storages (P) Ltd., which supported the entitlement to CENVAT credit for services used in construction activities.

3. Impact of premises being considered immovable property on CENVAT credit eligibility:
The revenue contended that since the premises became immovable property, they lost the character of goods, making the input services used for their construction ineligible for CENVAT credit. However, the tribunal found this argument irrelevant as the services were availed before 01.04.2011, and there was no bar on utilizing such credit after this date.

4. Utilization of CENVAT credit availed prior to 01.04.2011 after 01.04.2011:
The tribunal noted that the appellant availed CENVAT credit on input services before 01.04.2011 and utilized it after this date. There was no prohibition in the CENVAT Credit Rules, 2004, against such utilization. The tribunal referenced the Lemon Tree Hotel case, where similar facts led to a decision favoring the eligibility of CENVAT credit on services used for constructing a hotel building, which was later used to provide taxable output services.

5. Relevance of judicial precedents and CBEC circulars:
The tribunal considered the CBEC Circular No. 98/01/2008-ST dated 04.01.98, which the revenue cited to deny credit. However, the tribunal found that the definition of input services during the relevant period did not bar availing CENVAT credit on input services used for setting up premises. The tribunal also referred to the Gujarat High Court's decision in Mundra Ports and Special Economic Zone Ltd., which supported the eligibility of CENVAT credit on input services used for creating immovable property.

Conclusion:
The tribunal concluded that the appellant was entitled to avail CENVAT credit on input services used for constructing premises that were later let out, as these services were used to provide taxable output services. The tribunal set aside the impugned order and allowed the appeal with consequential relief, emphasizing that the utilization of CENVAT credit availed before 01.04.2011 was permissible, and the appellant's case was supported by relevant judicial precedents.

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