2019 (1) TMI 432 - AT - Service Tax

Tribunal grants appellants relief on input service credits & construction taxability

The Tribunal ruled in favor of the appellants, allowing their appeal regarding the eligibility of input service credits and the taxability of services ... CENVAT Credit - input services or not - consultancy service, construction service etc. - Department took the view that appellants did not provide any taxable output service using said inputs services and hence they were not entitled to take impugned cenvat credit - Held that:- Services used for constructing materials which were then rented out are very much eligible input service - Hon’ble High Court of Chattisgarh in CCE & ST Raipur Vs Vimla Infrastructure India P. Ltd. [2018 (3) TMI 1493 - CHHATTISGARH HIGH COURT] has held that the 'Inputs' have been used for providing output services which is taxable, therefore, by erecting the Railway Siding, the respondent is providing a taxable service for providing an output service, therefore, it is entitled to avail Credit under Rule, 2004 - credit allowed - appeal allowed - decided in favor of appellant. Issues:1. Eligibility of input service credits availed by the appellants.2. Taxability of services used for constructing materials that were rented out.Analysis:Issue 1: Eligibility of input service credits availed by the appellantsThe appellants, engaged in Renting of Immovable Property service, availed cenvat credit of service tax paid on various services during the period April 2007 to July 2009. The department contended that the appellants did not provide any taxable output service using these input services and thus were not entitled to the cenvat credit. Two show cause notices (SCNs) were issued proposing demands of significant amounts along with penalties. The appellants challenged these proposals, citing several Tribunal decisions supporting their position. The Tribunal found merit in the appellants' argument, noting that the decisions cited by them established that services used for construction activities related to rented properties were eligible input services. The Tribunal also referenced a specific case where disallowance of credit on such input services was deemed justified. Consequently, the Tribunal set aside the demands related to input service credits, except for a small amount conceded by the appellants.Issue 2: Taxability of services used for constructing materials that were rented outThe Tribunal referred to a judgment by the Hon'ble High Court of Chattisgarh in a similar matter, where it was held that services used for setting up facilities directly related to taxable output services are eligible for credit under the relevant rules. The Tribunal further highlighted decisions by other courts supporting this view, emphasizing that goods used for providing output services are eligible for cenvat credit. By aligning with these precedents, the Tribunal determined that the services used for constructing materials that were subsequently rented out by the appellants qualified as eligible input services. Therefore, the Tribunal allowed the appeal on these grounds, setting aside the penalties imposed and granting consequential relief to the appellants as per law.In conclusion, the Tribunal's judgment favored the appellants, establishing the eligibility of input service credits and the taxability of services used for constructing materials related to the rented properties. The decision was based on a thorough analysis of relevant legal precedents and interpretations of the law, providing clarity on the contentious issues raised in the case.