Cenvat credit on construction-related input services was allowed where hotel premises supported taxable renting of immovable property service.

Cenvat credit on input services used to construct hotel premises was admissible because those premises were later used for providing taxable renting of immovable property service, and the services had sufficient nexus with the output service. The authority followed settled precedent that consultancy, design, architect, technical, construction and similar services used in setting up premises for taxable output activity qualify for credit, and found no basis to depart from that view. The denial of credit was set aside. The separate demand relating to property tax was not pressed and was left outside the relief.

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Issues: Whether Cenvat credit of service tax paid on input services used in construction of the hotel premises was admissible when the premises were used for providing taxable renting of immovable property service.

Analysis: The disputed credits related to consultancy, design, technical, architect, construction, air travel agency and similar services used in setting up the hotel premises. The authority found that the cited decisions consistently held that services used for construction of premises which are thereafter used for taxable output services bear sufficient nexus with the output service and are eligible for credit. No new ground was shown to depart from that settled view. The separate demand of service tax on the property tax element was not pressed by the appellant.

Conclusion: The Cenvat credit on the disputed input services was held admissible and the denial of credit was set aside. The unpressed service tax demand was excluded from the relief.

Ratio Decidendi: Input services used for construction of premises that are employed for providing a taxable output service are eligible for Cenvat credit where the requisite nexus with the output service is established.

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