Construction of Godown for providing renting service

[Mehul Pandya]

We are constructing a Godown for providing renting of immovable service. 55% of work is completed and contractors have issued us the bill including service tax. we have also taken service tax registration.

now my query is that can we take credit of the input service received., If yes, do we have to mention the amount of cenvat credit in next return even though we are not providing any services.

[Akash Deep]

Dear Mehul,

By your query, we have understood that contractor is providing you construction services and raising invoice depicting service tax and cess amount separately. The property after construction will be used for provision of renting of immovable property service. Query required more clarification with respect to purpose of construction and nature of construction and whether contractor using its own material as well as labour or not. As you have stated that it is a godown I assume that it is for the purposes of storage of goods. You have also not mentioned the period which construction services has been provided.

Before answering the eligibility of CENVAT credit of service tax paid by you on receipt of construction service, we would like to point out the fact that if the godown is being constructed (if construction has started on or after 1.7.2012) for the purposes of post harvest storage of “agricultural produce”, no service tax is to be paid on such construction services as such service is covered under entry 14 of the exemption Notification No. 25/2012 dated 20.6.2012. The actual use of the godown is immaterial for this benefit. If that is the case, you should not pay service tax on such construction services. In that scenario question of taking any CENVAT Credit by you with respect to construction of godown does not arise.

If the godown under construction is not for the purposes of post harvest storage of agricultural produce, the construction services shall be taxable and CENVAT Credit of service tax paid would be rightly available. The construction service (either by way of WCS or by way of providing only labour) is being used in provision of out put services as defined under Rule 2(p) of CCR, 2004 i.e. renting of immovable property and thus become input service as defined under Rule 2(i) of CCR, 2004. The reasonable nexus between input service and out put services is well in existence.

Following judgments may be referred for more clarity of the issue.

CCE vs Sai Sahmita Storages (P) Ltd.    = 2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT

Navaratan S.G. Highway Prop. Pvt. Ltd vs. CST  = 2012 (9) TMI 452 - CESTAT, AHMEDABAD

Venus Investments vs.CCEx. = 2012 (11) TMI 574 - CESTAT, AHMEDABAD

M/s Galaxy Mercantiles Ltd, = 2013 (10) TMI 820 - CESTAT NEW DELHI - LB

M/s Galaxy Mercantiles Ltd, = 2013 (9) TMI 669 - ALLAHABAD HIGH COURT

We are of the view that CENVAT Credit of the service tax paid on construction services is rightly available to you.

Once you are registered with the department, you are required to file return and if no services were provided during the period covered by return a nil return is to be filed. Return to be filed by you should indicated the credit availed by you.

Akash Deep

09873463912

[Mehul Pandya]

THANK YOU for your reply.

Then under which category we can avail cenvat credit???(works contract services??)

if we are providing the material and labour??

if contractor is using its own material as well as labour??

construction has started after 1.7.2012

[Akash Deep]

Dear Mehul,

Taxable categorioes has lost their significance after 1.7.2012. for taking CENVAT Credit you dont need to find out the correct taxable category. only thing you need to know is whether the services qualifies as an input services and service in which such input service is used qualify as out put service and whether there is a reasonable nexus between input service and output service.

[Akash Deep]

For detailed Opinion you can discuss it will me on the number given in my [profile.

Regards

Akash Deep

[Mehul Pandya]

Thank you sir.

AI Summary

CENVAT Credit eligibility depends on taxable construction services and a reasonable nexus with renting of immovable property. CENVAT credit on service tax paid for construction of a godown is available when construction services are taxable and there is a reasonable nexus between the construction (an input service) and the renting of immovable property (the output service). Construction for post harvest storage of agricultural produce commenced on or after 1 July 2012 is exempt from service tax and thus does not give rise to CENVAT credit. Registrants must file returns and indicate any credit availed; nil returns are required if no services are provided in a period.