2026 (3) TMI 1067 - AT - Service Tax

Renting of Immovable Property Service: cenvat credit admissible where rent collection and invoice show continued output service despite ownership transfer.

Renting of immovable property service does not require ownership to exist for levy or recognition as an output service; a transfer of ownership alone does ... Disallowance of Cenvat credit - levy of service tax on Renting of Immovable Property Service - ambit of ‘input service’ under Rule 2(l) - Ownership of immovable property - nexus between input and output - sub-letting; permissive possession. Renting of Immovable Property Service as output service despite transfer of ownership - Disallowance of cenvat credit availed in respect of rent collected for the period 18.06.2012 to 30.06.2012 - HELD THAT: - The Tribunal found on the undisputed facts that transfer of ownership on 18.06.2012 did not conclusively negate the landlord-tenant relationship or the provision of service by the appellant. Ownership is not a condition precedent for levy of the Renting of Immovable Property Service, and the invoice issued by the purchaser for the period 18.06.2012 to 30.06.2012 implied that the appellant had permissive possession and continued to provide the renting service to the tenant. Because the appellant did provide an output service of RIPS during the disputed period, the cenvat credit availed in relation to that output service was properly claimable. [Paras 6, 7] The disallowance of cenvat credit was set aside and the appellant's claim for credit was held to be in order. Final Conclusion: The impugned order denying cenvat credit was quashed; the Tribunal held that the appellant provided RIPS for 18.06.2012 to 30.06.2012 despite the sale and was therefore entitled to the cenvat credit, allowing the appeal with consequential benefits as per law. Issues: Whether the denial of cenvat credit availed on rent/service tax for the period 18.06.2012 to 30.06.2012 is in order.Analysis: Ownership of immovable property is not a precondition for levy of service tax on Renting of Immovable Property Service (Section 65(90a) and Section 65(105)(zzzz) of the Finance Act, 1994). The transfer of ownership on 18.06.2012 does not, by itself, negate the existence of an output service if the transferor continued to collect rent and effectively enjoyed permissive possession or acted as a sub-lessor. Rule 2(l) of the Cenvat Credit Rules, 2004 defines input service and requires nexus with output services for cenvat credit eligibility. The invoice raised by the new owner for rent for the period 18.06.2012 to 30.06.2012 and the undisputed fact of rent collection establish that an output service (RIPS) was provided by the appellant for that period. Where an output service exists, cenvat credit availed on input services related to that output service is admissible. The denial of credit by the authorities, and related penalties under Rule 15(1) of the Cenvat Credit Rules, 2004, therefore lacked foundation in the facts and law applicable to the disputed period.Conclusion: The disallowance of cenvat credit is set aside and the appeal is allowed; the appellant is entitled to the cenvat credit availed for the period 18.06.2012 to 30.06.2012.