2025 (7) TMI 1545 - AT - Service Tax

Eligibility of the Appellant to claim CENVAT credit on various inputs services - Services like Architects Service Banking service Business support Service Chartered Accountant service Commercial or industrial construction service Design service Insurance service Management consultant service and Real Estate Agent service. which were used for rendering service under Renting of Immovable Properties commercial and industrial construction services etc. - HELD THAT - This issue is no longer res integra in as much as for the previous period this Tribunal in 2018 (8) TMI 331 - CESTAT BANGALORE allowed the appeal of the appellant by setting aside the impugned order. An appeal filed by the department against this order of the Tribunal was set aside by the Hon ble High Court of Karnataka in COMMISSIONER OF SERVICE TAX VERSUS M/S. GOLFLINKS SOFTWARE PARK PVT LTD. 2022 (12) TMI 472 - KARNATAKA HIGH COURT wherein it was observed that After considering various authorities the Tribunal has held that the assessee was entitled to CENVAT credit both on inputs and input services utilized for the construction to be utilized as output service being renting of immovable property. Appeal allowed.

Summary

ISSUES:

Whether CENVAT credit is admissible on various input services such as Architect service, Banking service, Business support service, Chartered Accountant service, Commercial or industrial construction service, Design service, Insurance service, Management consultant service, and Real Estate Agent service used for providing output services including renting of immovable property and commercial/industrial construction services.Whether input services used for construction of immovable property qualify as "input services" under Rule 2(1) of the Cenvat Credit Rules, 2004, prior to amendment on 01.04.2011.Whether the reliance on the Supreme Court judgment in Maruti Suzuki Ltd. v. Commissioner of Central Excise (2009) is appropriate, given its subsequent overruling by the Supreme Court in Ramala Sahakari Chini Mills Ltd. v. Commissioner of Central Excise (2010).Whether Board's Circular No. 98/1/2008-ST dated 04.01.2008, which denies credit on services used for construction of immovable property, applies to the facts of the case.Whether the pendency of a Special Leave Petition (SLP) before the Supreme Court on the same issue requires the Tribunal to await the Supreme Court's decision before adjudicating the present appeal.

RULINGS / HOLDINGS:

The Court held that input services like architect service, construction service, management consultancy service, real estate agent service, and erection and commissioning service used for construction of building/premises are admissible input services for taking CENVAT credit against the output service of renting immovable property.The Court found that Rule 2(1) of the Cenvat Credit Rules, 2004, both inclusively and exhaustively defines "input service" to include services used in relation to setting up the premises of the provider of output service, thereby making the contested input services eligible for credit.The Court observed that the Supreme Court judgment in Maruti Suzuki Ltd. was overruled by the later decision in Ramala Sahakari Chini Mills Ltd., which clarified that the interpretation of "input" in the relevant rules should not be restricted and requires reconsideration by a Larger Bench.The Court rejected the applicability of Board's Circular No. 98/1/2008-ST to the facts, stating that the circular "clearly confirms the ineligibility" of credit on services used for construction of immovable property that are neither goods nor services, but this was found not applicable given the nature of the output service and the applicable rules.The Court declined to stay the appeal pending the outcome of the SLP before the Supreme Court, as there was no stay granted and the issue was no longer res integra in light of prior Tribunal and High Court decisions.

RATIONALE:

The Court applied Rule 2(1) of the Cenvat Credit Rules, 2004, interpreting the definition of "input service" to include services used in relation to setting up premises for providing output taxable services, relying on prior Tribunal decisions and the High Court's affirmation.The Court relied on a series of precedents from various Tribunals and High Courts holding that input services used for construction of buildings related to taxable output services such as renting of immovable property are eligible for CENVAT credit.The Court noted the overruling of the Maruti Suzuki Ltd. judgment by the Supreme Court in Ramala Sahakari Chini Mills Ltd., highlighting the evolving judicial interpretation of the term "input" and the need for a broader, inclusive understanding.The Court acknowledged the Board's Circular No. 98/1/2008-ST but distinguished its applicability based on the facts and the nature of the output service, emphasizing the statutory definition over administrative circulars.The Court recognized the pendency of the SLP before the Supreme Court but found no justification to withhold relief given the absence of a stay and the settled nature of the issue in the Tribunal and High Court decisions.