Appellant entitled to CENVAT credit on input services for constructing residential complexes

The appellant, a construction services provider, utilized CENVAT credit on input services for service tax on constructing residential complexes. Revenue sought credit reversal on flat sales post-completion certificate issuance. Tribunal ruled appellant entitled to credit upon input service bill receipt, not liable to reverse credit post-completion certificate. High Court upheld, citing Rule 6 prospectivity. Tribunal set aside order, absolving appellant from credit reversal post-completion certificate.

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Issues:
1. Whether the appellant is liable to reverse the CENVAT credit availed on input services after selling residential flats post obtaining completion certificate.

Analysis:
1. The appellant, a provider of construction services for residential complexes, utilized CENVAT credit of service tax paid on input services for paying service tax on the output service of residential complex construction. Upon selling certain flats post receipt of completion certificate, the revenue contended that no service was being provided post-completion certificate, necessitating the reversal of proportionate credit involved in subsequent flat sales. The appellant received a show cause notice to reverse credit amounting to Rs. 24,31,231 availed from April 2013 to December 2015, leading to the impugned orders before the Tribunal.

2. The Tribunal, referencing a similar case, held that the appellant was entitled to avail credit immediately upon receiving bills/challans of input services, as per Rule 4(7) of Cenvat Credit Rules, 2004. The Tribunal clarified that no obligation existed for the appellant to reverse credit post obtaining the completion certificate, as the part of the service was exempted only after certificate issuance. The Tribunal's decision was upheld by the High Court of Gujarat, emphasizing that the explanation in Rule 6 regarding exempted services applied prospectively from its introduction date, absolving the appellant from reversing any credit post-completion certificate issuance.

3. Considering the above, the Tribunal set aside the impugned order, allowing the appeal with consequential relief. The judgment clarified that no obligation existed for the appellant to reverse any credit post obtaining the completion certificate, as the relevant provisions of Rule 6 applied prospectively from their introduction date, absolving the appellant from any liability in this regard.

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