Service Tax Appeal No.

20494 of 2020

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

BANGALORE

REGIONAL BENCH - COURT NO. 1

Service Tax Appeal No. 20494 of 2020

[Arising out of Order-in-Appeal No. 319/2020 dated 08/09/2020 passed
by the Commissioner of Central Tax (Appeals-I), Bengaluru]

M/s Divya Sree R O W Projects

LLP
Divyasree Chambers O Shaughnesay Appellant(s)
Road,shanthinagar,bangalore
BANGALORE
KARNATAKA
560025

VERSUS

Commissioner Of Central Tax,

Bengaluru East
BMTC BUILDING
OLD AIRPORT ROAD, DOMLUR, Respondent(s)
BANGALORE
KARNATAKA
560071
APPEARANCE:
Shri Akbar Basha, Chartered Accountant for the Appellant
Shri K.B. Nanaiah, Authorised Representative for the Respondent

CORAM:
HON'BLE SHRI S.S GARG, JUDICIAL MEMBER

Final Order No.20694/2021

Date of Hearing: 16/07/2021

Date of Decision:18/08/2021

Per : S.S GARG

The present appeal is directed against the impugned order dated

08.09.2020 passed by the Commissioner of Central Tax (Appeals) whereby
the Commissioner (Appeals) upheld the Order-in-Original and rejected the
appeal of the appellant.

2. Briefly the facts of the present case are that the appellant is a Limited

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Liability Partnership Firm under the provisions of Limited Liability Partnership

Act, 2008, and are holding registration under Service Tax and are paying
service tax as a provider and as a recipient of taxable services and they are
also availing CENVAT credit of the duty/tax paid on input services and capital
goods in terms of CENVAT Credit Rules, 2004. The appellant is engaged in
the construction of a complex, building, civil structure or a part thereof,
including a complex or building intended for sale to a buyer, wholly or partly,
except where the entire consideration is received after issuance of
completion-certificate by the competent authority. The Appellant imported
passenger lifts vide bill no 5511702/04/06/2016 and availed the credit of
CVD paid. During the scrutiny of records by the department audit team, the
availment of credit on passenger lifts were raised contending that lifts were
capital goods and credit on such capital goods are not allowed. On these
allegations, a SCN was issued to them for demand /recovery of an amount
of Rs.13,03,887/- being the irregular CENVAT credit availed and utilized, in
terms of provision of Rule 14 of CENVAT Credit Rules, 2004 read with
proviso to Section 73(1) of Finance Act, 1994. After following the due
process, the Original Adjudicating Authority confirmed the demand of
Rs.13,03,887/- and also imposed equal penalty under Section 78 of the
Finance Act. Aggrieved by the said order, the appellant filed appeal before
the Commissioner (Appeals) and the Order-in-Appeal was passed confirming
disallowance of credit vide Order dated 08.09.2020. Hence, the present
appeal.

3. Heard both the parties and perused the records.

4. Learned Consultant appearing for the appellant submitted that the

impugned order denying the CENVAT credit on passenger lifts is not
sustainable in law as the same has been passed without properly
appreciating the facts, the provisions of law and the binding judicial
precedents. He further submitted that the appellant are engaged in
construction of a complex, building, civil structure etc. and the said activity
is declared as service in terms of Section 66E(b) of the Finance Act. He
further submitted that service portion in works contract cannot be seen in
isolation and he referred to the decision of the Hon’ble Apex Court in the

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case of CCE Vs Larsen and Toubro, 2015 (39) STR 913 (SC), wherein it was
held that assessee was correct in their submission that a works contract is a
separate species of contract distinct from contracts for services simpliciter
recognized by the world of commerce and law as such, and has to be taxed
separately as such. He also referred to the decision in the case of Emaar
MGF Construction Pvt Ltd Vs CCE 2020 (34) GSTL 509 (Tri-del), wherein it
was held that judgment of the Supreme Court in Larsen & Toubro that a
Composite Works Contract cannot be taxed under Commercial Construction
Services under Section 65(105)(zzzh) as the scope is limited to cover
contract of service simplicitor only. He also placed reliance in the case of
CCE Vs ICl Sugar Ltd 2011 (271) ELT 360 (Kar), wherein it was held that
Raw materials used in manufacture of tank viz. plates/bottom of plates/roof
plates that Credit on these items could not be denied on ground that storage
tank was immovable property embedded to earth. Learned Consultant
further submitted that both the authorities have resorted to artificial
bifurcation on the activity into material and provision of service ignoring the
nature of work and the said interpretation is beyond the statutory
provisions. He further submitted that denying credit on passenger lifts on
the ground that said credit was falling under material portion of works
contract and as such do not qualify to be considered as input either, is not
proper. Learned Consultant further submitted that Lifts imported falls under
chapter 84, and the same is to be treated as capital goods for availment of
credit. The classification should be looked at the supplier’s end and not at
the recipient’s end and that classification of goods done at the
manufacturer’s end cannot be revised at the receiver’s end by the
department. For this submission, he relied upon the following decisions:
a) Commissioner v. MDS Switchgear Ltd. — 2008 (229) E.L.T. 485
(S.C.)
b) Sarvesh Refractories (P) Ltd. v. CCE & Cus. reported in 2007
(218) E.L.T. 488 (S.C.).
c) CCE, Goa v. Nestle India Ltd. reported in 2012 (275) E.L.T. 49
(Bom.)
d) CCE & Cus. v. Purity Flexpack Ltd. reported in 2008 (223) E.L.T.
361 (Guj.)
e) Cummins Diesel Sales & Service India Ltd Vs CCE Pune
[2015(315) ELT 63 (Tri-Mum)]
f) Asian Colour Coated Ispat Ltd. Vs CCE Delhi [2015(317) ELT
538 (Tri- Del)

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4.1. He further submitted that the capital goods are used for providing
output services. He also submitted that imported lifts are mandated for the
construction of building and therefore the appellant has used the capital
goods for providing output service/ works contract service. In terms of
Service Tax Determination of Value Rules, once an Appellant is engaged in
providing works contract service, such service provider is entitled to credit
on input services and on capital goods but the impugned order has travelled
beyond the Rule book to come out with a jurisprudence that “there exists
two distinct portion/components viz. material portion and service portion. He
further submitted that under the Finance Act, 1994, entire works contract is
not considered as service and only service portion in execution of works
contract is considered as service. He also submitted that in terms of Rule
2(p) of CENVAT Credit Rules, output services means any service provided by
a provider of service located in the taxable territory but shall not include a
service, -
a) specified in section 66D of the Finance Act; or
b) where the whole of service tax is liable to be paid by the recipient
of service.]

4.2. He also submitted that in the present case the appellant’s output
service condition is fulfilled. As the lift is not used for providing the service
specified in negative list and the whole of service tax is not paid by the
recipient of service, thereby the appellant has used the lift for providing
output services. He also submitted that after importing passenger lifts, the
same was installed in the building and the mere fact that the lifts are fitted
into the building does not have an impact on treatment of lifts as capital
goods. Even after fitting the lifts into the building, lift is a lift and covered
under chapter 84 and it cannot be considered as input just to deny the
benefit of CENVAT credit. Learned Consultant referred to the valuation
mechanism provided in terms of Rule 2A of Service Tax Determination of
Value Rules, 2006 which specifically prescribes the eligibility of credits on
input service and capital goods. He also submitted that lift is one of the
common facilities provided in the project and same is clearly mentioned in
the construction agreements. He further submitted that the entire value of

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construction including common facilities are considered for payment of

service tax and lifts which are capital goods are being used for providing
taxable services on which service tax is being paid by the appellant.
Therefore, denying the benefit of CENVAT credit on capital goods is not
proper. As far as interest and penalty is concerned, the learned Consultant
submitted that once they are eligible for credit, the question of interest and
penalty does not arise.

5. On the other hand, learned AR defended the impugned order and he

relied upon the decision in the case of Authority for Advance Ruling, Madhya
Pradesh, M/s Jabalpur Hotels Private Limited, 2020 (7) TMI 476.

6. After considering the submissions of both the parties and perusal of

the material on record, I find that when the passenger lift was imported, it
was classified under Chapter 84 and the Classification was accepted by the
Department and once the classification is accepted by the Department, it
cannot be changed at the receiver’s end by the Department in view of
various decisions relied upon by the appellant cited supra. Further, as per
the impugned order, two conditions have to be fulfilled for capital goods to
claim CENVAT credit as mentioned in Rule 2(a) (A) of CCR, 2004 for
eligibility of credit (a) They should fall under the category mentioned in Rule
2(a)(A), (b) They should be used as mentioned in Rule 2(a)(A) whereas as
per the Commissioner, only first condition is satisfied and as per the learned
Commissioner, the entire works contract is not service, only service portion
in works contract is service which is evident by section 66E(h) of the Finance
Act, 1994. Further, as per the Commissioner, the lifts fall under material
portion of works contract and hence credit is not eligible. Further, I find that
both the authorities have resorted to artificial bifurcation of the activity in
the material and provision of service ignoring nature of the work. I also find
that the imported lifts were used for the construction of building and
therefore the appellant has used the capital goods for providing output
service and this artificial bifurcation resorted to by the authorities, is beyond
the statutory provision and the basis of denying the credit is not proper
because the appellant has fulfilled the conditions in terms of Rule 2(p) of
CCR which defines output service and as the lift is not used for providing the
service specified in the Negative List and whole of the service tax is not paid

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by the recipient of service thereby the appellant has used the lift for
providing the output service. I also find that the lift is essential for providing
the output service and therefore, the appellant has fulfilled both the
conditions to avail the credit, hence the denial of credit is not sustainable,
simply because the lifts are fitted into the building does not have an impact
on treatment of lifts as capital goods because even after fitting into the
building, lift is a lift and covered under Chapter 84 and cannot be considered
as input just to deny the benefit of CENVAT credit. Further, I find that as per
the Construction Agreements also, lift is one of the common facility provided
in the project and lift is a capital goods being used for providing taxable
services on which service tax is being paid by the appellant, therefore
denying benefit of credit on capital goods is not proper. Further, I find that
the findings in Para 12.1 of the impugned order that the lifts were not used
in providing service but used in supply of material hence not eligible for
credit, is not sustainable in law because the capital goods used cannot be
attributed to service portion and material portion as envisaged in the order.
Therefore, the basis to deny the credit is not legally sustainable. Further, the
decision relied upon by the learned AR in the case of Jabalpur Hotels (cited
supra) is not applicable to the facts and circumstances of the present case
because the said decision is under the GST Law and decision of advance
ruling only therefore the same is not applicable to the facts of the case.

7. In view of my discussion above and relying upon the decisions cited

supra by the appellant, I am of the view that the appellant is entitled to
CENVAT credit on lift which is capital goods and the denial of the same is not
sustainable therefore I set aside the impugned order by allowing the appeal
of the appellant.
(Order pronounced in the open court on 18/08/2021)

(S.S GARG)
JUDICIAL MEMBER

pk...