By TIOL News Service

MUMBAI, NOV 22, 2016: THE Appellant is a provider of 'Renting of immovable property service' and had availed CENVAT credit of Rs.64,24,327/- being the tax paid on 'Repair and Maintenance', 'Consultancy', 'Courier', 'Telephone', 'Office rent' etc. received by them between 1st October 2008 and 30th September 2013.

The appellant owns a building with an area of 2,92,105 sq. feet spread over six floors and, admittedly, the building was occupied by tenants, with occupancy rates between 40% and 92%,during the impugned period.

Both the lower authorities held that credit availment is permissible only to the extent the input services are used to provide output services. By a meticulous computation of the occupancy rate, the credit sought to be reversed was arrived at Rs.16,40,141/-.

The original authority confirmed the demand and the same was upheld by the Commissioner (A) by relying on the decision in Treat Convenience Foods - 2013-TIOL-1755-CESTAT-DEL.

In appeal before the CESTAT, the appellant distinguished the facts involved in the case cited by the lower appellate authority by stating that in that case the service provider Treat Convenience Foods had themselves rented a floor area of 5152 sq. feet and, in turn, rented out 998 sq. feet to a tenant;that as the area used for rendering service was merely a portion of the total, with the rest under self-occupation, the credit allowed therein was correctly limited to the actual area rented out.

The Bench observed -

++ It is not the case of Revenue that they (appellant) were utilizing any portion of the space for themselves. The entire property was on offer for rendering the 'renting of immovable property service' and, to the extent that it was occupied at different times, the services utilized at the premises are attributable to the area available for rent;

++ It would be akin to forbidding a manufacturer from utilizing CENVAT credit on inputs that are yet lying in stock on the ground that these have not been used in the products … Or for that matter, that CENVAT credit on capital goods should be availed in proportion to the goods produced;

++ The CENVAT Credit Rules,2004 does not envisage such a proportional allocation;

++ The availment of credit is derived from rule 3 of CENVAT Credit Rules, 2004 and, as the taxes have been paid on common services used for property that is not in use by the appellant as recipient of service, availment of CENVAT credit is within the scope of the Rules.

The impugned order was set aside and the appeal was allowed.

(See 2016-TIOL-3030-CESTAT-MUM)