Cenvat credit on common premises services upheld for construction, security and internet services used in hotel operations.

Cenvat credit was held admissible on construction services used to set up hotel from which taxable output services were provided, because such services formed part of the common premises and fell within the input service framework as applied to specified services. Credit was also allowed on security services and internet services used for the same premises, since the Department did not prove exclusive use for exempted activity and the special credit provision enlarged entitlement for those specified services. On that basis, the demand based on denial of credit failed, while the limited relief already granted on interest and penalty was left undisturbed.

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Issues: (i) Whether Cenvat credit was admissible on construction services used for setting up the hotel premises from which taxable output services were rendered. (ii) Whether Cenvat credit was admissible on security services and internet services used commonly for the premises. (iii) Whether the demand confirming denial of credit could be sustained.

Issue (i): Whether Cenvat credit was admissible on construction services used for setting up the hotel premises from which taxable output services were rendered.

Analysis: The disputed construction service was used for the hotel building that housed the common business from which taxable and non-taxable services were rendered. The definition of input service and the special treatment accorded to the specified services supported availment of credit. The earlier decision in the appellant's own case was followed, along with other Tribunal and High Court authorities holding that construction-related services used for providing output services are eligible when they are part of the common premises of the service provider.

Conclusion: Credit on construction services was admissible and the denial was unsustainable.

Issue (ii): Whether Cenvat credit was admissible on security services and internet services used commonly for the premises.

Analysis: Security services were among the specified services covered by the special credit provision, and internet services were also used for the same premises from which output services were provided. Since the Department did not establish exclusive use for exempted activity, the restriction against credit did not apply. The Tribunal followed the settled view that the special credit provision enlarges entitlement to full credit on the specified services.

Conclusion: Credit on security services and internet services was admissible and the denial was unsustainable.

Issue (iii): Whether the demand confirming denial of credit could be sustained.

Analysis: Once credit on the disputed services was held admissible, the foundation of the demand failed. The findings below were also held to be contrary to judicial discipline in view of the settled precedent in the appellant's own case. The limited relief already granted below on interest and penalty was not disturbed because that part of the order had attained finality.

Conclusion: The demand confirming denial of credit could not be sustained.

Final Conclusion: The appeal succeeded and the order confirming the impugned demand was set aside, while the relief already granted on interest and penalty was left undisturbed.

Ratio Decidendi: Cenvat credit is admissible on services used for setting up and operating the common premises of a taxable service provider, and the special credit provision for specified services prevails where the services are not shown to be used exclusively for exempted activity.

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