By TIOL News Service

MUMBAI, OCT 26, 2014: THE appellantis engaged in providing taxable services under the categories of Convention Services, Health & Fitness services and Rent-A-Cab Services. During the scrutiny of ST-3 returns for the period October, 2007 to March, 2008, it was observed that the appellants availed CENVAT Credit of Service Tax paid on Construction service and Consulting engineer services.

It is the case of the Revenue that these services are not entitled to CENVAT Credit in terms of rule 2(l)(i) of the CCR, 2004 as these are not being used for providing output service.

A SCN dated 16.4.2009 came to be issued and the same was confirmed by disallowing the CENVAT Credit availed Rs.4,54,620/- with interest and equal penalty.

As the lower appellate authority upheld the order of the adjudicating authority the appellant is before the CESTAT.

The appellant submitted that the period in question is FY 2007-2008 and during the said period the CCR, 2004 allowed the credit as the Construction service as well as Consulting Engineers Service were utilized by them for construction of Convention Hall, which enabled it to render convention services and/or Mandap Keeper Services on which output tax was payable. If is further submitted that these input services were disallowed by amendment w.e.f. 1.4.2011 and hence they pray for allowing the appeal with consequential benefit of taking re-credit which was reversed earlier; that as reversal has been made much before the issue of SCN, no proceedings u/s 73 were attracted.

The AR, on query by the Bench, admitted that Construction Services and Consulting Engineering Services were allowable as input services during the relevant period under Rule 2(l) r/w Rule 3 of the CCR, 2004.

The Bench observed -

"…I hold that the appellant is entitled to take CENVAT Credit on the construction services and consulting engineering services availed by it during the financial year 2007-08 being prior to 1.4.2011 when such CENVAT Credit was expressly disallowed by amendment of the Rules. Further, I hold that the whole proceedings against the appellant were misconceived. Hence, the impugned order is set aside. The appeal is allowed and appellant is permitted to take CENVAT Credit of Rs.4,54,620/- on receipt of a copy of this order. The appellant is also entitled to consequential benefits, if any, flowing from this order."

(See 2014-TIOL-2087-CESTAT-MUM)