CENVAT – In case commissioning of plant is done by different party, then prima facie assessee who undertakes maintenance activity cannot take credit for ST paid on commissioning – Pre-deposit ordered: CESTAT
By TIOL News Service
MUMBAI, JUNE 07, 2013: IN this interesting case, the applicants entered into two agreements with M/s Ispat Industries Ltd.-
The first agreement was in respect of Installation and Commissioning of the Plant.
++ And for this purpose the applicant imported the plant on payment of appropriate customs duty. The imported equipment was leased out to M/s Ispat Industries Ltd. and who availed the CENVAT credit of the CVD paid on the plant. Thereafter, M/s Ispat Industries Ltd. entered into a contract with the applicants for installation and commissioning of the plant.
Pursuant to this agreement, the applicant got the plant installed and commissioned.
Thereafter, another agreement was entered into between the two parties and which is in respect of operation and maintenance of the plant.
On this activity of ‘maintenance', the applicant is paying Service Tax.
Incidentally, the applicant has availed CENVAT credit of Rs.1.62 Crores in respect of the service tax paid on the taxable service received of installation and commissioning and which is sought to be denied.
Before the Bench, the applicant submitted that they are entitled for the CENVAT credit as operation and maintenance will come after the installation of the plant and hence they are integrated activities.
The Revenue representative submitted that the oxygen plant is an immovable property and hence the applicants are not entitled to credit in respect of the service tax paid on the taxable services in respect of installation and commissioning of the plant.
The Bench observed –
“7. We find that the applicants entered into an agreement dated 22.5.2006 with Ispat Industries Ltd. for operation and maintenance of the plant. The amount in dispute is in respect of the credit of service tax which is in respect of taxable service received during installation and commissioning of the plant which is under a different agreement. We find that in case the installation and commissioning of the plant was done by a different party, then the assessee who undertakes the operation and maintenance and activity cannot take credit in respect of service tax in respect of installation and commissioning of the plant. In the present case, different activities are undertaken by the applicants under a different agreements and the dispute is in respect of the credit which was availed in respect of installation and commissioning of the plant under a different contract and the applicants want to utilize that credit towards payment of service tax in respect of operation and maintenance service which is under a different contract. In this view of the matter, prima facie, the applicants have not made out a case for total waiver of service tax. Keeping in view the facts and circumstances of the case, the applicants are directed to deposit 25% of the service tax demand within 8 weeks. On deposit of the said amount, pre-deposit of the remaining dues is waived and recovery thereof is stayed during the pendency of the appeal.”
In passing: In the matter of leasing tanks, the Revenue is of the view that on the lease rent received in respect of these storage tanks, the applicant is liable to pay service tax under the category of 'Storage and Warehousing Services'. The CESTAT had in this matter held that prima facie no service tax liability arises under the proposed category and had accordingly granted a waiver of the adjudged dues. See 2012-TIOL-1077-CESTAT-MUM. Did someone mention renting of immovable property?
(See 2013-TIOL-848-CESTAT-MUM)
