Tribunal allows appeal on CENVAT credits and rejects Service Tax demand based on lease agreements

The Tribunal allowed the appeal challenging the recovery of inadmissible CENVAT credits, holding that credits availed prior to 07.07.2009 were admissible. Additionally, the demand of Service Tax based on lease rental agreements was rejected, emphasizing that taxability is determined by actual collection of rent rather than amounts specified in agreements. The order passed by the Commissioner was set aside, granting consequential relief to the Appellant.

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Issues Involved:
1. Recovery of inadmissible CENVAT Credits.
2. Demand of Service Tax based on lease rental agreements.

Summary:

Issue 1: Recovery of Inadmissible CENVAT Credits
The order for recovery of CENVAT Credits of Rs. 2,24,25,358/- availed on inputs and input services was challenged. The Appellant argued that credits on inputs like steel, cement, and construction services availed prior to 01.04.2011 were admissible. The Tribunal noted that credits were admissible up to 07.07.2009, when Notification No. 16/2009-CE introduced an explanation-II into the definition of "inputs." The Tribunal held that credits availed prior to 07.07.2009 amounting to Rs. 1,07,33,533/- were clearly admissible. The Tribunal also concluded that the entire credit availed by the Appellant in respect of goods purchased for construction of premises were admissible credits, citing the precedent set by the Hon'ble High Court of Gujarat and the Tribunal's own judgment in the case of Bridge & Roof Co. (India) Ltd. vs. CCE & ST, Vadodara-I.

Issue 2: Demand of Service Tax Based on Lease Rental Agreements
The demand of Service Tax of Rs. 53,31,866/- was based on the value mentioned in the lease rental agreements. The Appellant argued that lesser amounts were collected due to inadequate business turnover, despite the higher amounts specified in the agreements. The Tribunal held that the invoice value, consistent with the actual collection of rent, would determine the taxability, irrespective of the agreed terms in the lease agreements. The Tribunal emphasized that any variance to the terms of the agreement on mutual consent through an oral agreement is out of the purview of tax authorities.

Conclusion:
The appeal was allowed, and the order passed by the Commissioner of Central Excise, Customs & Service Tax, Nashik-I was set aside with consequential relief.

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