By TIOL News Service

MUMBAI, NOV 13, 2015: THE appellant is Maharashtra Cricket Association. They are registered with the Department as provider of services of 'Renting of Immovable Property'. They constructed a cricket stadium at Village Gahunje, Tal. Mulshi, Distt. Pune and for the said purpose, received architect's services and design services from certain consultants, who did not have any office or fixed establishment in India; that, therefore, the appellant paid service tax on the services received in terms of Sec. 66A of FA, 1994; after paying service tax on reverse charge basis the appellant had taken CENVAT Credit of such service tax.

A SCN came to be issued for denying the CENVAT credit taken. The SCN took the support of the CCR, 2004 and also the Board Circular 98/01/2008-ST dated 04.01.2008 [Reference code 096.01/04.01.08] where it is clarified that the credit of service tax paid on commercial or industrial construction service or works contract service, used for construction of immovable property, is not eligible as input service credit to person providing 'Renting of Immovable Property Services'.

The CCE, Pune-III confirmed the ST demand of Rs.2.32 crores and since the same was already paid it was appropriated. Interest of Rs.1.50 lakhs paid by the appellant was also adjusted against the interest liability.No penalty was imposed by the adjudicating authority.

The Maharashtra Cricket Association is before the CESTAT.

It is submitted that the SCN as well as confirmation of the demand was made only on the basis of Board Circular No. 98/01/2008-ST dated 04.01.2008 but the said Circular is contrary to the definition of 'Input Services' provided under Rule 2(l) of CCR, 2004. It is also submitted that period involved in the present case is 2008-09 and as per the Input service definition prevailing at the material time, services used in relation to setting up the premises of provider of output service is specifically included in the definition of input service; that in the present case, CENVAT Credit was availed in respect of services such as Architect Services, Consulting Engineers Services, Management Consultancy Services etc. used for construction of stadium and the stadium was rented out on which the appellant is paying the service tax under the head of 'Renting of Immovable Property Services'. Reliance is placed on the following decisions in support viz.

+ Navaratna S.G. Highway Prop. Pvt. Ltd. - 2011-TIOL-1703-CESTAT-AHM

+ Laxmi Enterprise - 2014-TIOL-2042-CESTAT-AHM

+ Sai Samhita Storages Pvt. Ltd. - 2010-TIOL-1751-CESTAT-BANG

+ SaiSamhita Storages Pvt. Ltd. - 2011-TIOL-863-HC-AP-CX

The AR, while reiterating the order passed by the original authority, also adverted to the Board Circular 98/01/2008-ST and submitted that Immovable property is neither subject to Central Excise duty nor Service Tax and input credit of service tax can be taken only if the output is a service liable to Service Tax or the goods are liable to Excise duty. Inasmuch as since immovable property is neither service nor goods, input credit cannot be taken, the AR emphasized. Moreover, Board Circular is binding on the departmental officer, submitted the AR.

The CESTAT after considering the submissions extracted the definition of "input service” as appearing in Rule 2(l) of CCR, 2004, (prior to 1.4.2011) & observed -

++ From the definition of input service, any service used by a provider of taxable service for providing an output service is admissible 'input service'. Input service specifically includes amongst others services used in relation to setting up,premises of provider of output service or an office relating to such premises. On the analysis of the definition, it becomes clear that the 'input service' is not limited to the services for providing output service, but it also includes the service for setting up the premises of provider of output service.

++ In the present case the input services are Architect Services, Consulting Engineers Services, Management Consultancy Services etc. used for setting up the premises i.e. stadium of provider of output service i.e. the appellant. The output service is renting of stadium and other miscellaneous services.

++ In view of this undisputed position of law, the services, used by the appellant for setting up the stadium, are input services and squarely covered by definition of 'input service' as reproduced above. The Board Circular appears to have travelled absolutely contrary to the clear and plain language of the definition of the input service.

++ It is very pertinent that legislators knowing fully that there is no tax or excise duty on the constructing premises of the output service provider, included services used for setting up of the premises of provider of output services, for the simple reason that if the premises are used for providing the output service, the credit of input services used for setting up the premises of service provider must be allowed.

++ In view of this clear and unambiguous definition of input service, it is apparent that the Circular is contrary to the definition of input service which is not tenable.

++ We are of the considered view that in the present case the appellant is clearly entitled for Cenvat Credit in respect of all the services used for construction/setting up the stadium which is admittedly used for providing the output services.

Setting aside the o-in-o passed by the CCE, Pune-III, the appeal was allowed with consequential relief.

(See 2015-TIOL-2418-CESTAT-MUM)