TaxTMI 
TaxTMI 
2024 (9) TMI 115
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....14. It was alleged that the appellant was not entitled to avail the credit in respect of the four flats and was therefore required to reverse proportionate Cenvat credit in respect thereof. Show cause notice dated 31.10.2019 was issued proposing to recover the proportionate amount of Rs.1,43,933/- towards Cenvat Credit in respect of unsold flats from the appellant and also the appellant had received Rs.37,20,967/- during the period from 2014-15 to June 2017, on which service tax amounting to Rs.4,66,538/- was not deposited. The adjudicating authority confirmed the demand as proposed in the show cause notice, however in appeal filed by the appellant, the Commissioner (Appeals) dropped the demand of service tax of Rs.4,66,538/- and confirmed the demand of Rs.1,43,933/- holding that the appellant had wrongly availed the credit without provision of output services, thereby contravened the provisions of rule 6(3) and 6(3A) of the Cenvat Credit Rules, 2004. The appellant has preferred the instant appeal before this Tribunal. 3. Heard Ms. Dheera Khatri, learned counsel for the appellant and Shri Rohit Issar, learned Authorized Representative for the Revenue. 4. The learned Counsel for t....
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....refore the appellant did not pay any service tax thereon. Consequently, the appellant was required to reverse the proportionate Cenvat Credit. The appellant has admitted that no service tax was paid by them on the said four flats as the sale of such flats was not a 'service' being covered by the exclusion clause in the definition of 'service' under section 65B (44) of the Act. 8. For considering the relevant statutory provisions concerning the present controversy, the observations made in a recent decision in M/s Shanti Reality Pvt. Ltd [Final order No. 57984/2024 dated 08.08.2024] needs to be looked into: 8. The statutory provisions to decide the issue of eligibility of Cenvat Credit needs to be appreciated. Section 65B(44)(a) defines 'service' which means an activity carried out by a person for another, for consideration and includes a declared service, but shall not include transfer in the title of goods or removable property by way of sale, gift, or any other manner. Coupled with this, it is necessary to examine the provisions of 66E, which provides that following shall constitute 'declared services', namely, "a). renting of removal, property, b). construction of a com....
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....r flats. The appellant had the option to take proportionate amount of credit in respect of the input services pertaining to the eight flats sold earlier and reverse the balance amount towards the unsold four flats. 10. As per rule 3 of the CCR 2004, Cenvat credit of service tax is paid on input services used to provide output service is eligible. A service provider is entitled to credit of excise duty paid on inputs and capital goods and service tax paid on input services used by him for providing the output service. Thus availment of cenvat credit has direct nexus to the payment of taxes. The very fact that the appellant has no liability to discharge the service tax they are not eligible to retain the amount availed by them towards the Cenvat credit. 11. Before adverting to the decisions cited at the Bar, it is necessary to take note of the observations of the authorities below. The adjudicating authority quoting the definition of 'input service' as defined under Rule 2(l) of CCR, 2004, observed that since the sale of flats after completion certificate are not the 'output service', Cenvat credit cannot be availed on this 'input service', making assessee liable to pay proportiona....
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....sheets for the proportionate credits availed after completion certificate, it has fulfilled its obligation under rule 3 of the rules read with rule 6 thereof and therefore, no liability to pay any amount equal to 8%/10% of the sale price of property can be presented after receipt of completion certificate under rule 6 of the rules." Hence the aforesaid decision is not applicable to the instant controversy. In terms of the principle enunciated by the Hon'ble Delhi High Court in M/s Lally Automobiles (supra), I conclude that it was for the appellant to have segregated the quantum of input service attributable to the unsold flats and exclude them from the records maintained for availing credit. Hence the appellant is not entitle to retain the amount of Cenvat credit in respect of the unsold flats and is required to proportionately reverse the same. 13. The decision of the Hon'ble Delhi High Court in M/s Lally Automobiles decided the issue whether the assessee could claim the credit on input which were not services by holding that input credits can be used for payment of service on output service provided such services are used to provide output services. Further, it has been observe....