Cenvat credit on construction-related input services and pre-registration inputs was sustained for taxable renting activity.

Cenvat credit was recognised for service tax paid on input services used to construct an IT park, because the completed premises were deployed for taxable renting of immovable property services and the construction inputs were treated as integrally connected with that output service. Credit was also not denied merely because some input services were received before registration of the output service, as entitlement depended on the nature and use of the inputs for the taxable activity. On that basis, the demand, interest and penalties were held unsustainable and the orders below were set aside.

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Issues: (i) Whether Cenvat credit of service tax paid on input services used for construction of an IT park was admissible when the completed premises were used for providing taxable renting of immovable property services. (ii) Whether Cenvat credit could be denied on the ground that some input services were received before registration of the output service.

Issue (i): Whether Cenvat credit of service tax paid on input services used for construction of an IT park was admissible when the completed premises were used for providing taxable renting of immovable property services.

Analysis: The facility was constructed by availing various input services and was thereafter used for providing taxable output service by way of renting of immovable property. The reasoning adopted in earlier decisions, including that input services used for creating the facility are integrally connected with the provision of the taxable output service, was applied. On that basis, the credit could not be denied merely because the services related to construction of an immovable property used for the taxable activity.

Conclusion: The issue was decided in favour of the assessee; Cenvat credit on the construction-related input services was held admissible.

Issue (ii): Whether Cenvat credit could be denied on the ground that some input services were received before registration of the output service.

Analysis: The objection based solely on subsequent registration was not accepted. The credit entitlement was treated as dependent on the nature and use of the input services for the taxable output service, and not defeated merely because registration was obtained later.

Conclusion: The issue was decided in favour of the assessee; credit was not denied merely because the services were received before registration.

Final Conclusion: The demand, interest, and penalties were unsustainable, and the orders below were set aside.

Ratio Decidendi: Input services used for constructing a facility that is employed in providing a taxable output service qualify for credit, and such credit cannot be denied solely because the service recipient obtained registration later.

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