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 not negate the service where the transferor continued to collect rent or enjoyed permissive possession or acted as sub-lessor. Rule 2(l) Cenvat Credit Rules requires an input service to have nexus with an output service; the invoice and undisputed rent collection for the relevant period establish that an output service was rendered. Consequently cenvat credit availed on input/services related to that output is admissible, and the prior disallowance and penalties lacked foundation for the disputed period.

---

---

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.

---