Commissioner Of Central GST Gurgaon Commissionerate vs. M/S Dlf LTD

Facts

The Commissioner of Central GST, Gurgaon, the appellant, filed an appeal against an order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The CESTAT had set aside an order by the Commissioner of Service Tax (ADJ) Delhi, which denied Cenvat credit on inputs, input services, and capital goods used for providing renting of immovable property services between June 1, 2007, and September 30, 2010. The respondent, M/s DLF Ltd., a provider of various taxable services including renting of immovable property, had availed Cenvat credit for its service tax liability for this period. The appellant contended that services used for erecting or maintaining immovable property, which itself is neither a finished good nor an output service, are not eligible for Cenvat credit.

Held

The Court held that the services in question fall within the definition of 'input service' under Rule 2(1)(ii) of the Cenvat Credit Rules, 2004. The Court relied on its previous decision in Commissioner of C. Ex., Delhi-III vs. Bellsonica Auto Components India P. Ltd. (2015(40) S.T.R. 41 (P&H)). The reasoning was that the definition of 'input service' includes services used in relation to setting up, modernization, renovation, or repairs of premises of a provider of output service. The Court found that the land taken on lease and the factory constructed thereon were directly or indirectly used in relation to the manufacture of the final product. The amendment in 2011, which excluded construction services from the definition of 'input service', was not retrospective and therefore not applicable to the respondent's case. The Court also noted that the department had accepted the decision in Bellsonica Auto Components India P. Ltd. The questions of law were answered against the appellant and in favour of the respondent. The appeal was dismissed.

Key Issues

1. Whether Cenvat Credit could be availed on inputs, input services, and capital goods used for the construction of immovable properties, as per Rule 2(1)(ii) of the Cenvat Credit Rules, 2004? 2. Whether commercial or industrial construction service or works contract service used for the construction of an immovable property could be treated as an input service for the output service of renting of immovable property under the Cenvat Credit Rules, 2004? 3. Whether, based on the facts, the assessee was entitled to avail Cenvat Credit on inputs, capital goods, or input services used for providing the output service of renting of immovable property? The appellant argued that services used for erecting or maintaining immovable property are not eligible for Cenvat credit because the immovable property itself is neither a finished good nor an output service, and these services do not qualify as inputs under Rule 2(1) of the Cenvat Credit Rules, 2004. The respondent argued that the definition of 'input service' under Section 2(1)(ii) of the Cenvat Credit Rules, 2004, is wide enough to cover the services in question, falling under both the 'means' and 'includes' parts of the definition, as they were directly or indirectly related to the manufacture of their final product or setting up of their factory premises.