By TIOL News Service

MUMBAI, AUG 20, 2013: THE appellant are engaged in rendering the taxable service of 'renting of immovable property' and they discharge service tax liability. They availed CENVAT credit of various services used for construction of the said mall and utilized the credit for payment of service tax on renting of immovable property services.

The CBEC vide Circular No.96/7/2007-ST dated 23/08/2007 as amended by Circular No 98/1/2007-S.T., dated 04/01/2008 inter alia clarified that Input credit of service tax can be taken only if the output is a 'service' liable to service tax or a 'goods' liable to excise duty; that since immovable property is neither 'service' or 'goods' input credit cannot be taken.

Based on the above, show-cause notices were issued to the appellants proposing to deny CENVAT credit.

The notices were adjudicated by the Commissioner of Service Tax-II, Mumbai under a common order and wherein CENVAT credit of Rs. 6,00,63,212/- availed by the appellant was disallowed. Further, credits of Rs. 32,24,111/- and Rs. 15,62,151/- taken by the appellant were also disallowed in respect of input services such as security, telephone, commission, brokerage, advertising, repairs, installation, etc. Interest was also demanded and an equivalent penalty was also imposed along with another penalty u/s 77.

The CESTAT while granting stay observed - (2013-TIOL-604-CESTAT-MUM) -

"5. We have carefully considered the rival submissions. The hon'ble High Court of Andhra Pradesh and the Ahmedabad bench of this Tribunal in the case of Sai Sahmita Storage (P) Ltd. (supra) - (2011-TIOL-863-HC-AP-CX) and Navratna S.G. Highway Property Pvt. Ltd. (supra) - (2012-TIOL-1245-CESTAT-AHM) respectively have held that excise duty paid on inputs and service tax paid on input services used in the construction of immovable property can be taken and utilized while discharging service tax liability on the renting of such immovable property. In the light of these decisions, the appellant had made out a strong prima facie case in their favour for grant of unconditional waiver of pre-deposit of the dues adjudged against them. Accordingly, we grant unconditional waiver from the pre-deposit of the dues adjudged against the appellant and stay recovery therefore thereof during the pendency of these appeals."

The appeal was heard recently.

The appellant submitted that they had informed the adjudicating authority that they had not received the show-cause notice dated 5.6.2009 and, therefore, are not in a position to reply to the said notice. However, the adjudicating authority observed that the notice has been served on the appellant inasmuch as the same had been sent to the appellant through Courier and the Courier Agency had not returned the same and, therefore, it should be presumed that the notice has been properly served. This, the appellant submits is violation of the principles of natural justice. [Incidentally, had these submissions been made at the time of hearing of the stay application, the matter would not have travelled this far.]

As regards availment of CENVAT credit, the appellant submitted that they have taken credit of Service Tax paid on construction services amounting to Rs. 1,50,14,412/- and since the commercial building has been rented out on which they are paying Service Tax, they are eligible for taking credit on the input services of construction service. They rely on the decisions in Cadila Healthcare Ltd. - (2013-TIOL-12-HC-AHM-ST), SaiSahmita Storages (P) Ltd. - (2010-TIOL-1751-CESTAT-BANG) and Navratna S.G. Highway Prop. Pvt. Ltd. vs. Commissioner of Service Tax, Ahmedabad - (2011-TIOL-1703-CESTAT-AHM) in support.

The Bench observed -

"5.1 From the records, it is evident that the show-cause notice dated 5.6.2009 was sent to the appellant through courier, M/s. Blue Bird Mail Services Pvt. Ltd. Further, another copy of the said notice was sent on 31.5.2010, which was returned undelivered. Sending show-cause notice through courier is not an approved mode of service envisaged under Section 37C of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. Any summon or notice to the party has to be sent by registered post with acknowledgement due, to the person for whom it is intended or his authorized agent, or by affixing a copy of the same in the business premises of the person or by displaying the same in the notice board of the office which issued the notice. From the records it is seen that none of these modes have been followed by the Revenue.

5.2 In view of the above, it has to be held that there is no proper service of the notice on the appellant in respect of show-cause notice dated 5.6.2009 is concerned. Therefore, there is clear violation of the principles of natural justice. Therefore, the matter has to go back to the original adjudicating authority for service of the show-cause notice dated 5.6.2009 afresh to the appellant and appellant should be given opportunity to make their submissions against said show-cause notice and only thereafter, the order confirming any demand can be passed against the appellant. Similarly, the adjudicating authority has to give a clear finding as to why the appellant is not eligible for the benefit of Service tax credit paid on the inputs services in respect of construction services in the light of the decision of Hon'ble High Court of Gujarat to the case of Cadila Healthcare (supra) and the decisions of this Tribunal in the case of SaiSamhita Pvt. Ltd. and Navratna S.G. Highway (supra)."

In fine, the appeals were allowed by way of remand.

Tail-piece : We had covered this fascination for courier agencies exhibited by the Service Tax officers in DDT 1111 dated 15.05.2009. And by the way, Speed Post and approved Couriers have been notified as additional modes of delivery of SCNs and Orders concerning Central Excise & Service Tax by the Finance Act, 2013 by amending section 37C of the CEA, 1944 as made applicable to Service Tax via section 83 of the FA, 1994.

(See 2013-TIOL-1241-CESTAT-MUM)