TMI Blog2018 (1) TMI 827X X X X Extracts X X X X X X X X Extracts X X X X ..... here it was held that if a receipt is for reimbursing the expenditure incurred for the purpose, the mere act of reimbursement, per se, would not justify the contention of the Revenue that the same, having the character of the remuneration or commission, deserves to be included in the sum amount of remuneration / Commission - levy of service tax on the reimbursable expenses of electricity charges and water charges is unsustainable and requires to be set aside. Demand of service Tax on Fitout charges - Held that: - these are movable items (chairs, tables and other items) which are handed over to the tenants for use by them. The appellant has paid VAT on the consideration received in the said transaction for transfer of right to use the goods - VAT and Service Tax being exclusive, further demand of service tax on the very same consideration received for transfer or right to use of goods cannot sustain - demand set aside. Appeal allowed in part. - Application Nos. ST/MISC/41121/2017 & ST/EH/41883/2017 (by dept) Appeal No.ST/249/2012 - Final Order No. 40110 / 2018 - Dated:- 17-1-2018 - Ms. SulekhaBeevi C.S. Member ( Judicial ) And Shri Madhu Mohan Damodhar, Member ( Technical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and water charges. Apart from this, appellant had leased fitouts like tables, chairs etc. to the tenant for which charges were collected as fitout charges. Department took the view that appellant had wrongly availed credit on input services and also that they had not discharged service tax on amounts collected towards electricity, water charges and consideration received for leasing out the fitouts. ii) That input service credit availed on construction services can be divided into three periods i.e., (1) prior to 16.06.2005 (2) between 16.06.2005 and 01.06.2007 and (3) post-01.06.2007. The appellants after completion of the building during the above period was providing services of renting of immovable property as well as Management, Maintenance, Repair Services (MMR services, for short). iii) It was fairly conceded that though appellant had availed cenvat credit on construction services prior to 16.6.2005 since the appellant was not providing any taxable service during the period prior to 16.6.2005, the amount of ₹ 5,16,774/- cannot be considered as eligible for availing credit. MMR services became taxable only with effect from 16.6.2005 and Renting of Immovable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in relying upon the decision in Venus Investments Vs CCE Vadadora - 2013 (29) STR 72 (Tri.-Ahd.) . Ld. Counsel rely on decisions in the following cases : (1) CCE Visakhapatnam VsSaiSahmita Storages (P) Ltd. - 2012 (23) STR 341 (AP) (2) Mundra Ports Special Economic Zone Ltd. - 2015 (39) STR 726 (Guj.) (3) Navaratna S.G. Highway prop. Pvt. Ltd. Vs CST Ahmedabad - 2012 (28) STR 166 (Trj.-All.) vi) On the issue of levy of service tax on electricity charges and water charges, it is submitted that the appellant has collected these amounts which are included in the MMR services. These amounts collected being actual reimbursable expenses cannot be subject to levy of service tax as has been decided by this very Bench in the case of Plaza Maintenance and Services Ltd. vide Final order No.41806-41807/2017 dt.28.8.2017 and decision of Hon'ble High Court in CST Chennai Vs Sangamitra Services Agency - 2014 (33) STR 137 (Mad.). vii) Another allegation is with regard to non-payment of service tax on fitout charges collected by the appellant to the tune of ₹ 34,20,527/-; that appellant was handing over the movable items like chairs, tables and other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to electricity and water charges, she adverted to Rule 5 (1) of Service Tax (Determination of Value) Rules, 2006 and submitted that any expenditure or cost incurred by the service provider in the course of providing the taxable services should be included in the value for the purpose of charging tax. As the activity involves provision of uninterrupted power supply from the generators and the electricity consumption from the meter is not charged directly to the tenants, but to the appellant, it is clear that appellant fails the test of being a pure agent for deducting the charges from the total value of taxable services. 5.4 With respect to inclusion of value of fitout charges, she referred to para-11 of the impugned order and submitted that the terms of the agreement indicate that the ownership of the fitouts remain with the appellant. Therefore, there is no question of transfer or sale attracting payment of VAT. The fitouts are clearly hired as part of the consideration of the immovable property and the value relating to enjoyment of the use of the fitouts require to be included in the value of the RIP services. The claim of the appellant that they have paid VAT in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusively in or in relation to providing exempted services. The impugned input services availed by appellant are included in the said Rule 6 (5) and as the appellants were also using these services partly for rendering MMR services, availment of impugned input service credits availed during this period in entirety, amounting to ₹ 11,63,81,259/-, is very much in order. This being so, that part of the order denying this quantum of input credit is set aside. (iii) Post 1.6.2007 - The disputed credit amount involved during this period is ₹ 12,04,53,005/-. The appellant has contended that during this period the service of renting of immovable property was made taxable. The adjudicating authority has denied this credit amount on the basis of Board Circular No.98/1/2008 dt. 04.01.2008. On going through this circular, we find that said clarification therein is flawed. While the issue sought to be clarified concerns eligibility of certain input services for output services, namely, renting of immovable property, the clarification thereof has veered into a proposition that immovable property neither being subjected to Central Excise duty nor Service Tax, therefore input c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of final product in the substantive/specific part of the definition. In each case it has to be established that inputs mentioned in the inclusive part is used in or in relation to the manufacture of final product . It is the functional utility of the said item which would constitute the relevant consideration. Unless and until the said input is used in or in relation to the manufacture of final product within the factory of production, the said item would not become an eligible input. The said expression used in or in relation to the manufacture have many shades and would cover various situations based on the purpose for which the input is used. However, the specified input would become eligible for credit only when used in or in relation to the manufacture of final product. Hydrogen gas used in the manufacture of sodium cyanide is an eligible input, since it has a significant role to play in the manufacturing process and since the final product cannot emerge without the use of gas. Similarly, Heat Transfer Oil used as a heating medium in the manufacture of LAB is an eligible input since it has a persuasive role in the manufacturing process and without its use it is impossible to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f imposition of penalty does not arise. The appeal is allowed with consequential relief to the appellants. Viewed in this light we find that denial of input service credit of ₹ 12,04,53,005/- for the period post-1.6.2007 also cannot be sustained and hence the relevant portion of the impugned order denying the same is also set aside. So ordered. 7.2 Demand of service Tax on Electricity and Water charges Ld. counsel for the appellant has submitted that these are amounts which are actually paid towards electricity and water charges and therefore amount collected towards reimbursable expenses cannot be subjected to levy of service. The said issue is covered by the decision in the case of Plaza Maintenance and Services Ltd. Vs CST Chennai vide Final Order No.41806-41807/2017 dt.28.08.2017 and also the case of CST Chennai Vs Sangamitra Services Agency - 2014 (33) STR 137 (Mad.). Following the said decisions, we hold that levy of service tax on the reimbursable expenses of electricity charges and water charges is unsustainable and requires to be set aside, which we hereby do. 7.3 Demand of service Tax on Fitout charges - The impugned order demands service ..... X X X X Extracts X X X X X X X X Extracts X X X X
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