Renting services

[ankit doshi]

A company is providing 2 services Export of service under BAS & also renting excess place available. Can such company avail accumilated input credit (mainly in relation of BAS services) to pay service tax liability on renting service.

[Vijay Chitte]

Yes, you can utilized the accumilated credit to for payement of service tax on renting service, this view has been also held in the case betweeb M/s. Lakshmi Technology and Eng. Industries Ltd. Vs. CCE, Coimbatores [2011-TIOL-700-CESTAT-MAD].

The rules permit taking of credit under a common pool and permit use of the credit from the common pool for different purpose and there is no restriction placed to the effect that credit  accounts should be maintained for use for manufacture of excisable goods and for use for providing services. 

But, be ready for litigation, like above cited case.

[ankit doshi]

Thank You

[DEV KUMAR KOTHARI]

As per purpose seeking approach, the input service should be related with output service for CENVAT credit also. In that view of matter inputs for BAS canot be considered as input for renting.

However, from your query it appears that you have surplus space from the same place from where you are renderign BAS. Therefore, an additional point in your favour is that space as such is a unit or asset for renderign service, temporarily surplus space having been let out is clearlay related with BAS service also. tereefore, there should not be denial of CENVAT credit agaisnt inputs for BAS against service tax on rent becasue rent is also earned due to providign excess space otherwise meant for BAS. 

[VIKAS SARAF]

Mr. Chitte: Oddly, the cited case of Lakshmi vs. CCE is NOT AVAILABLE on TMI. Can you kindly email me the whole order - as available to on TIOL, to my email ID: [email protected] ? Would really appreciate it. Thanks.

Also, what small portion of the said order I could find online, it refers to Rule 3 (1) of the Cenvat Credit Rules 2004. However, I think Rule 3 (4) (e) clearly states that the Cenvat Credit may be utilized for payment of - among others, (e) Service Tax on any Output Service.

 

Moreover, the word "any" is very important here. Unlike in case of Manufacturing and / or Trading of Excisable goods, where cenvat credit of only those inputs and input - related services / products can be availed that have direct or indirect relation to the output goods, cenvat credit of any service input can be setoff against service tax payable on output service.

Off course, above is subject to any notification(s) that restricts cenvat credit of service tax paid on inputs that I am not aware.

Also, I guess the problem is that the Department is very much adjusted to viewing Service Tax from Excise point - of - view.

Would request others to kindly provide more references of various judgment that are either in favor or against the above interpretation of law.

 

[Rama Krishana]

You may also find this case by visiting this link:

CCE, COIMBATORE Versus LAKSHMI TECHNOLOGY AND ENGINEERING INDUSTRIES LTD (2011 -TMI - 204299 - CESTAT, CHENNA)

AI Summary

Cenvat credit use for output services may cover service tax on rented surplus space, subject to nexus and litigation.
Whether accumulated Cenvat credit from BAS can be used to pay service tax on renting surplus premises is contested: one view treats credits as pooled and usable against any output service, permitting set off for rent; a purpose related approach requires input-output nexus, denying set off unless the rented surplus space is factually connected to the BAS unit; factual nexus may allow credit but litigation risk remains.