TaxTMI 
TaxTMI 
TaxTMI 
2018 (10) TMI 1557
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....30.9.16 2.11.17 Demand under Rule 6 of CCR, 04 1.1 The facts involved in the above appeals are identical. The Appellants are engaged in development of real estate projects. They had availed Cenvat Credit of Service Tax paid on various input services used to construct residential complex. They were registered with Service Tax authorities as service provider and had paid Service Tax under works contract service category for the residential units sold to various customers from time to time. 1.2 That in case of M/s. Alembic Ltd. on 24.7.14, their residential project was awarded Completion Certificate. Similarly, in case of M/s. Shreno Ltd. the Completion Certificate was obtained for their residential project on 24.2.14. As on date of obtaining such Completion Certificate, approx. 32% and 35% property respectively, remained unsold by the Appellants and for which no bookings were made. As such, whenever such properties would be sold in future, no Service Tax would be payable thereon. 1.3 The Appellants had given due intimation to jurisdictional Service Tax authorities after receipt of Completion Certificate that they shall be availing only proportionate Cenvat Credit on input servic....
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....ects up to receipt of the completion certificate, however, after obtaining the completion certificate for the project, the same constituted immovable property and as per the provisions of service tax laws, the Appellants continued to pay service tax even after receipt of completion of certificate in respect of properties for which any amount of consideration was received prior to obtaining completion certificate. Whereas properties exclusively sold after receipt of completion certificate, being in the nature of immovable properties, where no portion of the property including advance was received prior to receipt of completion certificate, the Appellants treated the same to be sale of immovable property and did not pay any service tax at all on that. 2.1 It was further argued that both the Appellants had duly informed the Revenue Authorities in writing, at the time of receiving completion certificate, whereby they had informed that since completion certificate was obtained for the project, they shall be availing credit only in respect of the percentage of property on which service tax was paid (on square foot basis) whereas no credit will be availed in respect of the percentage of ....
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....inance Act 1994 itself, the same can never be exempt service. It is a case of the Appellants that for the said reasons, Rule 6 of the Cenvat Credit Rules, 2004 in toto cannot be applicable to the Appellants at all. That the whole of the demand which is raised under Rule 6 of the Cenvat Rredit Rules, 2004 therefore deserves to be dropped/vacated. 2.4 It was also argued by the Appellants that it is only by virtue of amendment carried out in the Cenvat Credit Rules while notification no. 13/2016-CE(NT) dated 01.03.2016 whereby Explanation 3 was inserted to Rule 6 of the Cenvat Credit Rules, 2004 which provided, for the first time on prospective basis that the exempted service defined under Rule 2(e) of the CenvatCredit Rules shall include an activity which is not a service as defined under Section 65B (44) of the Finance Act, 1994. 2.5 It was submitted that such explanation was not required if sale of immovable property was otherwise covered as exempt service since the statue does not waste it was. It was further submitted that it is only by virtue of such prospective amendment that for the first time, Rule 6 of the Cenvat credit rules 2004 can include sale of property after receipt....
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.... ELT 277(Tri-LB) * Ashok Iron & Steel Fabricators 2003(156) ELT A212(SC) 2.7 The Appellants also submit that the present situation is akin to services being provided to the state of Jammu and Kashmir to which the provision of Finance act, 1994 do not extend and service tax is not payable thereon, to hold that Rule 6 of the Cenvat Credit Rules 2004 cannot apply to such circumstances at all. The Appellants relied upon various decisions in support of this contention. That as a corollary, the Appellants also argued that after receipt of completion certificate in respect of the property, when certain portion of the property will not be subjected to tax later on, the position is similar to "remission" being granted under central excise laws, wherein the finished goods will not attract central excise duty and still it was held that the credit cannot be denied to the assesee even when duty will not be paid on the finished goods since there was no specific provision prohibiting such credit entitlement to the assessee. 2.8 It is the case of the Appellants that as held by the Hon'ble Tribunal in the case of foods, fats and fertilizers Ltd 2009 (244) E.L.T. (Tri-Bang), when a scientifi....
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....ment of Credit in the present proceedings. The dispute is limited to whether the Appellants are required to reverse any portion of the Cenvat Credit availed by them, after receipt of Completion Certificate for the projects, since thereafter, they will not be discharging Service Tax liability on properties sold thereafter, where no advance was received prior to receipt of Completion Certificate at all. The Appellants however, was paying Service Tax in case of properties which were not yet sold by way of sale deed even after obtaining Completion Certificate, however where advances were received for such properties prior to the date of obtaining such Completion Certificate. 5. The Appellants submitted that they availed only proportionate Cenvat Credit, determined on scientific basis by them (considering square foot area where Service Tax was paid and balance area where Service Tax will not be paid after Completion Certificate). They had not only given due intimation in this regard at the time of obtaining completion certificate but also produced CA certificate to support their case in this regard. The present appeals involves the following legal questions: a. Whether receipt of cons....
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....tuation was not to be treated as exempt service and did not attract the mischief created under Rule 6 of the CCR, 04. 7. However, for the period prior to 1.4.16, does this mean that a service provider can take and retain full credit on input services received even after receipt of Completion Certificate? In our considered view, the situation will be governed by Rule 3 of the CCR, 04 till such time, i.e. till the time Rule 6 was specifically made applicable by virtue of the deeming fiction created. 8. It is trite law and in terms of Rule 3 of the CCR, 04, Cenvat Credit of Service Tax paid on input services used to provide output service, is eligible. In fact, Hon'ble Mumbai High Court in the case of Mercedes Benz India P. Ltd. 2016(41) STR 577(Bom) held, qua "trading activity" vis-à-vis Rule 6 of the CCR, 04 mechanism, that it could not have been the intention of the Government to encourage trading by allowing full credit prior to 1.4.11 and that the "value" of exempt supply in nature of trading, as provided after 1.4.11 in law for complying with proportionate credit requirements, should be made applicable to the period prior to 1.4.11 as well. 9. In the present case, it i....
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....it. The details of the availment of credit on pro-rata basis in respect of hydrogen gas was submitted in reply to the show cause notice dated 28-1-2008. Similarly in respect of Crude palm oil and Nickel Catalyst. The pro-rata availment details of credit has been given, All these shows that the Appellants had not availed the entire credit for both dutiable and exempted products. Therefore allegation of the Department is not sustainable. There is indeed a separate account of the receipt and consumption of the inputs used in dutiable and exempted products. The methodology of pro-rata allocation of Hydrogen Gas utilized in the manufacture of vanaspathi (exempted final products) and stearic acid (dutiable final products) were also explained and the detailed steps and formulas were also brought on records. We have also gone through the methodology for arriving at the pro-rata allocation of hydrogen gas. This is given in Page 53 to 55 of the Paper Book. The Appellants had adopted a scientific method of calculating the hydrogen gas consumed in exempted products. From the total hydrogen gas consumed, the quantity of hydrogen gas consumed for the manufacture of stearic acid is subtracted and....
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....t of completion certificate. It was also argued that while Rule 6 of the CCR, 04 deals with credits availed afresh, i.e. after output activity becoming exempt, however Rule 11 is the only provision which deals with credits availed in the past when output activity was wholly taxable however, at later point in time, became exempt. 13. We agree with such plea raised by the Appellant. While the law does not intend to allow any undue benefit to a service provider in terms of Cenvat Credit of Service Tax paid on input services used in providing non-taxable output activity, however, as held by the Hon'ble Apex Court in the case of Dai IchiKarkaria 1999(112) ELT 516(SC), Modvat / Cenvat Credit is a vested right. Once it is legally and validly availed, the same cannot be denied and/or recovered unless specific provisions exist for the same. The Appellants have also correctly relied upon the decisions / judgments in the case of HMT Ltd., TAFE, Ashok Iron & Steel Fabricators (supra) wherein an identical situation qua "inputs" used in production of dutiable finished goods was involved, where on a particular date, the said Finished goods became exempt and the issue involved was as regards cred....
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....he present position to one where "remission of duty" is granted on finished goods in case the same is destroyed or lost as well as when services are provided to the state of J&K, however, considering the fact that legally, the credits availed at a time when output service was wholly taxable as well as the fact that after receipt of completion certificate, the Appellants have anyway availed only proportionate credit by maintaining separate accounts, such other pleas need not be adverted to. 18. From the analysis of all the legal provisions for the purpose of Cenvat Credit in respect of input service, we find that before obtaining the completion certificate, the service of the appellant was very much taxable during which period the appellant received input service. The relevant sub Rule (7) of Rule 4 of Cenvat Credit Rules, 2004 reads as under:- Rule 4(7) 4(7) The Cenvat Credit in respect of Input service shall be allowed, on or after the day on which the invoice, bill or as the case may be, challan referred to in Rule 9 is received: "Provided that in case of an input service where the service tax is paid on reverse charge by the recipient of the service, the CENVAT credit in re....
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....prietor ship firm or partnership firm , the expression, "following month" and the "month of March" occurring in sub rule- 7 shall be read respectively as "following quarter" or "quarter ending with the month of March" From the above rule, it is clear that the assesse is not required to wait till output service is sold to the service recipient. The assesse can take the credit immediately after the day on bill/ challan of input service is received. In the present case, there is no dispute that the appellant have availed the credit after receipt of bill, challan in respect of input service, therefore, the appellant was legally entitled to take the credit on the date after the receipt of service Bills/ Challans. Therefore, the availment of cenvat credit by the appellant is absolutely legal and correct in accordance with Rule 4(7) of Cenvat Credit Rules, 2004. At the time of taking credit, there is no existence of any exempted service, therefore, there is no application of Rule 6. The part of the service was exempted only after obtaining completion certificate. Thereafter, the appellant was not required to avail the cenvat credit on the input service, if any, received after obtaining t....
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....unt of receipt of Completion Certificate and on which no Service Tax would be paid in future. 20. It has been rightly pointed out by the Ld. Counsel for the Appellants that in case of "demand of 8%/10%" confirmed vide the impugned orders involved in the present bunch of appeals, the period considered was only after receipt of completion certificate and even penalties are imposed as such. That no demand has been raised under Rule 6 or Rule 14 of the CCR, 04 for period prior to obtaining completion certificate at all, while the Appellants had reversed Cenvat Credit under protest based on CERA objection, for the period 2010 till obtaining Completion certificate on the basis that such input services cannot be wholly said to be used for providing 100% taxable output service. 21. It is the case of the revenue that by demanding 8%/10% amount of sale of immovable property after obtaining Completion Certificate, the credits availed in the past are ipso facto regularized. It should however be appreciated that payment of 8%/10% is only an option or rather a mechanism to seek credit reversal on lump sum basis, where the assesse cannot maintain separate accounts / reverse proportionate credit....