ST - Once it is acknowledged that both taxable and exempted services is rendered from additional premises and reversal of proportionate CENVAT credit is sought, denial of credit on renting service is unsustainable: CESTAT
By TIOL News Service
MUMBAI, OCT 17, 2018: THE appellants are providing taxable service under the category of Business Auxiliary Service from their premises at Room/Unit No. 65 Atlanta Nariman Point, Mumbai. They have also taken on rent another premises i.e. Room/Unit No. 67 in the same building from where also they were providing Business Auxiliary Services and in addition undertaking trading of rubber products.
Revenue found ample reasons to issue two show cause notices citing the following grounds -
++ Since the premises viz. Room/Unit No. 67 was not registered with the department, therefore, credit availed on the 'input service', namely 'renting of immovable property' service is not admissible.
++ Since the appellant has been providing taxable services as well as exempted service, namely trading of goods, from their premises i.e. unit No. 65 & 67, therefore, they were required to reverse proportionate CENVAT credit under Rule 6(3) of CCR, 2004 attributable to the exempted service (trading activity).
Not wanting to leave anything to chance, the adjudicating authority confirmed the charges leveled in both the demand notices.
Insofar as seeking reversal of proportionate CENVAT credit was concerned, the appellant reversed the same along with interest and also paid the penalty as ordered by the adjudicating authority.
However, against denial of CENVAT credit availed of service tax paid on 'Renting of Immovable Property', the appellant filed an appeal before the Commissioner(A) only to find the same being rejected.
And so, the appellant is before the CESTAT.
It is submitted that once the department has acknowledged the service (trading of goods) provided from Unit No. 67 as exempted service and directed the appellant to reverse the proportionate CENVAT credit attributable to trading activity (and which they have complied with), the second show cause notice proposing denial of credit of service tax paid on renting of immovable property service in respect of the said unit No. 67, is bad in law and not sustainable. So also, merely because the said premises i.e. Unit No.67 was not registered while providing same output services as from Unit No.65, credit cannot be denied to them on the input service in view of the judgment in the case of Vako Seals Pvt. Ltd. - 2015-TIOL-1296-CESTAT-MUM.
The AR supported the order of the lower authority.
The Bench considered the submissions and while relying upon the case laws cited observed -
++ It is not in dispute that the appellant have been providing taxable service as well as exempted service (trading activity of rubber product) from Unit No. 67; all the invoices are raised from Unit No. 65 irrespective of whether services are provided from Unit No. 65 or 67. The input service invoices are also issued in favour of Unit No. 65.
++ The department acknowledging the fact that from Unit No. 67, Business Auxiliary Service as well as trading activity were carried out, directed reversal of the proportionate credit attributable to exempted service rendered from Unit No.67.
++ Once the department acknowledged that services rendered from the premises No. 67 are both taxable and exempted service and demanded reversal of proportionate CENVAT credit attributable to said exempted service, denial of credit on the input service i.e. Renting of Immovable Property sounds contradictory, hence cannot be sustained.
The impugned order was set aside and the appeal was allowed.
(See 2018-TIOL-3146-CESTAT-MUM)
