2019 (5) TMI 1147 - AT - Service Tax

Tribunal overturns denial of CENVAT credit on Service Tax for employee accommodation.

The Tribunal allowed the appeal, overturning the Commissioner (Appeals) order, as the denial of CENVAT credit on Service Tax for residential accommodation ... CENVAT Credit - service tax paid on Business Support Service - denial on the ground that cost of rent paid for residence of employee is not taxable for which credit is not admissible - HELD THAT:- As found from the order-in-original, denial of CENVAT credit on rent paid for residential accommodation was justified by the adjudicating authority on the ground that Service Tax was not payable to the owner of the property for rending the residential accommodation to Dr. Puri. It was not known if such Service Tax collected on such rent has been paid to the property owner who, in tern, had paid the same to the department. Liability of discharge of tax in the said case does not fall on the house owner as service provider ABMCPL, who collected the Service Tax, is duty bound to pay the same to the Government. In the instant case, there is no dispute concerning such payment being not paid to the Government by ABMCPL. Even in such a situation the liability is supposed to be fixed on the person who collected the same and it can never be fixed on the person from whom it is collected. When service tax was collected by service provider even on providing for residential accommodation which is admissibly not subjected to service tax, there is no point in denying benefits of availment of CENVAT credit to the appellant when legality of such collection at the receivers end was not questioned. Appeal allowed - decided in favor of appellant. Issues:Denial of CENVAT credit on Service Tax for Business Support Service due to rent paid for employee's residence not being taxable.Analysis:1. The appellant contested the denial of CENVAT credit on Service Tax for Business Support Service, arguing that the rent paid for an employee's residence is admissible as per the pre-2011 amended definition of input service related to business activities. The appellant relied on various legal precedents to support their contention, emphasizing the jurisdictional distinction between the appellant and the service provider.2. The respondent Department supported the Commissioner (Appeals) order, citing a Bombay High Court case to distinguish expenses not covered under 'relating to the business' expression. The respondent emphasized the need to establish a nexus between input service and the business of the assessee, along with the definition of support service under the Finance Act 1994.3. The Tribunal examined the case record and found that the appellant engaged Dr. Puri through a secondment agreement with ABMCPL, where all costs, including salary and residential accommodation, were borne by the appellant. The Tribunal clarified that no employee-employer relationship existed between the appellant and Dr. Puri, as the services were provided by ABMCPL. The denial of CENVAT credit on rent for residential accommodation was justified based on the non-payment of Service Tax to the property owner.4. The Tribunal reviewed the sample invoice provided by the appellant, which indicated the expenditure for providing accommodation to Dr. Puri, inclusive of rent and ancillary expenses. Despite the Service Tax component on residential accommodation, the Tribunal noted the inconsistency in objecting to the tax collection on salary payment. The Tribunal emphasized that the liability for tax payment falls on the service provider, not the recipient, and allowed the appeal, setting aside the Commissioner (Appeals) order.5. In conclusion, the Tribunal allowed the appeal, overturning the Commissioner (Appeals) order dated 20-02-2018, based on the lack of justification for denying the appellant's CENVAT credit on Service Tax for the residential accommodation provided to Dr. Puri by ABMCPL.