TMI Blog2022 (5) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... when the TDS amount has been borne by the assessee and only the consideration for the services as agreed upon by the parties has been paid to the service provider, the same cannot be included in the taxable value for determining the Service Tax liability. The demand of Service Tax of Rs.10,24,257/- for the period May 2006 to March 2010, by way of issue of SCN on 08.06.2011, by invoking the extended period of demand, is not sustainable, in the absence of any justification for invoking the extended period. Accordingly, the above demand of Service Tax, along with demand interest and penalties is set aside as time barred. CENVAT Credit - HELD THAT:- During the relevant period, the definition of the term input service specifically covered services used in relation to setting up of the premises of the provider of output services . The reliance placed by the Commissioner on CBEC Circular No.98/1/2008 dated 04- 01-2008, is not sustainable in as much as the said circular has been held to be contrary to the provisions of law, in several judgments. It is a fact on record that these services were used for construction of hotel premises, from which various taxable services would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he period from 2006-07 to 2009-10 on various input services such as, architect services, consulting engineering services, management consultant services, commercial or industrial construction services, etc. has also been disallowed on the ground that as a result of these services, what emerges is the immovable property in the form of Hotel and hence such CENVAT credit is not admissible. In this connection, the Commissioner has also relied on CBEC s Circular No. 98/1/2008 dated 04.01.2008, wherein it has been clarified that such services relating to construction of immovable property are not entitled for credit, as neither any excise duty nor any service tax was paid on such immovable property. The Assessee contented that upon construction of the Hotel, the same would be used to provide various taxable services, such as Mandap Keeper Services, etc. While confirming the demand, interest under Rule 14 of the CENVAT Credit Rules, 2004 and equal penalty under Rule 15 (3) of the said rules have also been confirmed. 2. Appearing on behalf of the Appellant, learned Counsel, Shri. G. Natrajan, has made the following submissions. 2.1 On the issue of demand of Service Tax on withhold t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Per Contra Shri V.R. Pawan Kumar, the learned Authorized Representative for the Department, has referred to Section 67 of the Finance Act, 1994 and Rule 7 of the Service Tax (Determination of Value) Rules, 2006 and contended that the withholding tax paid by the Appellant shall also form part of the consideration. He argued that the tax deductor is bound to furnish Form 16A to the service provider and file quarterly return. He also referred to Section 90 and 91 of the Income Tax Act and submitted that the income earned by the foreign service provider is prima facie liable to Income Tax in India and subject to the Double Taxation Avoidance agreements, if any; if tax is paid in one country the income would be exempted in another country. He also relied on the decision of the Tribunal in the case of Sheladia Rites v. CCE 2019 (27) GSTL 707 Tri-Hyd, wherein, TDS was paid by grossing up the net consideration payable to the local service provider, it was held that Service Tax is payable including the TDS. 4. In rejoinder, the learned Counsel for the Appellant submitted that any TDS deducted in favour of a local person would be set off against his Income Tax liabilities and hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the service providers are concerned, the CENVAT Credit rules have been framed under Section 94 of the Finance Act, 1994 and the reference to Section 37 is unwarranted. 8. We have carefully considered the arguments advanced before us by both sides and also perused the case records. 9. With regard to the issue of Service Tax liability on the withholding tax component, it is true that, the issue is covered in favour of the Appellant in various decisions relied upon by the learned counsel for the Appellant. However, it is observed that, the issue as to how the withholding tax paid in India would be treated by the Foreign Service provider, while determining his tax liabilities, has not clearly come out in those decisions. In TVS Motor Company supra, after referring to the provisions of the Income Tax Act and various precedent decisions, it has been held as below. 14.5 The above decisions have categorically held that when the TDS amount has been borne by the assessee and only the consideration for the services as agreed upon by the parties has been paid to the service provider, the same cannot be included in the taxable value for determining the Service Tax liability. 9.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... input service . 10.1 In Lemon Tree Hotel v. CCE-2018-(10)-GSTL-241-Try- Hyd., this Tribunal has held as below. 7 . It is undisputed that the services are utilized for brining to existence building which is used by the appellants for hospitability business and is used for rendering output services like mandap keeper and health club and fitness centre and dry cleaning service and internet cafe services. It is an unimaginable that a hotel can render these services without a building in its place. In our considered view, the input services are availed by the appellant in respect of Works Contract Services, Project Management Services and Architectural Professional Services used for construction of a building, which subsequently is put into use for rendering taxable output services. We find that the adjudicating authority was in error to rely upon the Board Circular No. 98/1/2008-S.T., dated 4-1-2008 in as much, the definition of input services during the relevant period does not bar availment of Cenvat credit on all input services. In order to appreciate correct position of law, the definition of input services under Rule 2(l) of the Cenvat Credit Rules, 2004 as was during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide that cement and steel would not be eligible for input credit. According to learned Counsel for the appellant, the appellant is not manufacturer and, therefore, the provisions of Explanation 2 of Rule 2(k) would be applicable only to the factory and manufacturer. The appellant is neither having any factory nor he is manufacturer. The appellant is a service provider of port. We need not go into this question as to whether the appellant is a factory or manufacturer or service provider in view of the fact that it is not disputed by Mr. Y.N. Ravani, learned counsel appearing for the Revenue in this Tax Appeal that the appellant provides service on port for which he is getting jetty constructed through the contractor and the appellant has claimed input credit on cement and steel. The cement and steel were not included in Explanation 2 from 2004 up to March, 2006. The Cenvat Credit Rules, 2004 were amended in exercise of the powers conferred by Section 37 of the Central Excise Act, 1944 with effect from 7-7-2009, the date on which it was notified by the Central Government from the date of the notification. According to learned Counsel for the appellant, this amended definition would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arger Bench of the Tribunal used the expression that intention behind amendment was to clarify. The coverage under the input from where this intention has been gathered by the Tribunal has not been mentioned in the judgment. There is no material to support that there was any legislative intent to clarify any existing provision. For the same reason, as mentioned above, the decision of the Apex Court in Sangam Spinners Limited v. Union of India and Others, reported in (2011) 11 SCC 408 = 2011 (266) E.L.T. 145 (S.C.) would not be applicable to the facts of the instant case. 9. Mr. Ravani has also vehemently urged that since jetty was constructed by the appellant through the contractor and construction of jetty is exempted and, therefore, input credit would not be available to the appellant as construction of jetty is exempted service. The argument though attractive cannot be accepted. The jetty is constructed by the appellant by purchasing iron, cement, grid, etc., which are used in construction of jetty. The contractor has constructed jetty. There are two methods, one is that the appellant would have given entire contract to the contractor for making jetty by giving material on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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