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2018 (1) TMI 827

.6.2005 and 01.06.2007, the impugned input services availed by appellant are included in Rule 6 (5) of CCR, 2004, 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 - Post 1.6.2007, 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. - Levy of service tax - reimbursable expenses - Electricity and Water charges - Held that: - The said issue is covered by the decision in the case of CST Chennai Vs Sangamitra Services Agency [2013 (7) TMI 862 - MADRAS HIGH COURT], where 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 .....

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ustrial Development Corporation Ltd., the appellant had to develop and maintain Hi-Tech office space for IT and ITES companies. The appellant entered into an agreement with their holding company namely M/s.Ascendas (India) Private Ltd. for construction of building which included comprehensive services in relation to development and construction such as project management, conceptual and detailed design for architecture, marketing, consultancy service etc. The appellant availed credit on various input services. After completion of building in August 2005, the appellant leased out the office premises to various IT and ITES companies. Apart from rent, they also collected maintenance charges on monthly basis from the tenants for providing facilities and maintenance of the buildings. The maintenance charges collected included reimbursable expenses of electricity 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 electricit .....

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able services on MMR as well as RIP services, it cannot be said that services were exclusively used for exempted services; that therefore as per Rule 6(5) appellant is eligible for credit. v) For the period Post-1.6.2007, the department has denied credit placing reliance on the Board Circular No.98/1/2008-STdt. 4.1.2008; that Board circular has clarified that credit on construction services is not eligible since immovable property is neither a service nor goods; that clarification issued by the Board in this regard is highly erroneous. What is relevant for availment of input service credit is the use of input services for providing taxable output service. In the present case, input service of construction services is used for providing the output service of RIP service and MMR services which are taxable; that the Commissioner has erred 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. V .....

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sion in the case of Venus Investments Vs CCE Vadodara - 2012 (28) STR 174 (Tri.-Ahmd.) supports this stand of the department; that construction services bring into existence any immovable property / building. The immovable property thus brought into existence by the use of construction services is used for providing the rental services. In the circumstances, while nexus between the said services and the services of RIP may be established, same cannot be held to be used in or in relation to the maintenance and repair services. The MMR services are performed on the immovable property and the immovable property is not utilized to provide the service. Therefore, if at all any credit eligibility would arise, it would only be w.e.f. 1.6.2007 and not before. 5.3 In respect of the charges relating 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 elec .....

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which is a taxable output service. The adjudicating authority has denied the credit on the construction services on the ground that renting of immovable property service was brought into tax net only w.e.f. 16.6.2005. Adjudicating authority has denied the credit on the ground of renting of immovable property was brought into service tax only w.e.f. 1.6.2007. We find merit in the assertion of the appellant is that though renting of immovable property service was not taxable till 16.6.2007, nonetheless, they had also been providing taxable MMR services during this period and as per Rule 6 (5) of the CCR 2004, they are eligible for credit on whole of the service tax in respect of the specified input services listed out therein, unless such service is used exclusively 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 quantu .....

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Coming to the specific part, one finds that the word input is defined to mean all goods, except light diesel oil, high speed diesel oil and petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not. The crucial requirement, therefore, is that all goods used in or in relation to the manufacture of final products qualify as input . This presupposes that the clement of manufacture must be present. 8. Yet again considering the inclusive part of the definition of input , it was held as follows. All these considerations become relevant only when they are read with the expression used in or in relation to the manufacture 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 inp .....

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ateria as far as the service providers are concerned. That being the position, the decision of the Hon ble High Court of Andhra Pradesh would be applicable to the present case. In that case also, the Hon ble High Court took the view that without use of cement and TMT bars for construction of warehouse assessee could not have provided storage and warehousing service . In this case also, without utilizing the service, mall could not have been constructed and therefore the renting of immovable property would not have been possible. The issue involved is squarely covered by the decision of the Hon ble High Court of Andhra Pradesh. Since the service tax demand itself is not sustainable, the question of 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 .....

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