Utillisation of cenvat credit

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 April 2012 Dear sir,

i am working in real estate sector company. In my company, we gave one commercial building on rent.
the company have its two project for that the company is liable to pay service tax on works contract.

while discharging the total liability of ST we are using Cenvat credit of works contract..
.. why bcs as we are multiple service provider.

now the department want that the company should pay cash service tax on renting of immovable property as per circular No. 98/1/2008-ST dated 4/01/2008.. not by cenvat credit. whether department contention is right..

I need expert advice..

please help on this issue

Imran

CA Nikhil Jhanwar

CA Nikhil Jhanwar (Expert)
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23 April 2012 Department is absolutely right in its contention. Cenvat credit in respect of input service used in contruction of immovable property cannot be used for paying service tax in respect of immovable property, Circular states that immovable property is neither ''good nor 'service'therefore, no credit is applicable.

Further, This Circular has been given legal recognition by making changes definition of ínput service'' in Cenvat Credit Rules, 2004 w.e.f. 01.04.2011.

Further if dispute pertain to the period prior to 04.01.2008(date of Circular)then it can be contended

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Querist : Anonymous

Querist : Anonymous (Querist)

24 April 2012 dear sir,

thanks for giving me solution. but i am not agree with that because in circular, it is clearly said that immovable property is neither liable to 'service tax' nor 'excise duty'

but what we are constructing is liable to pay service tax. there is no relation between rental premises & construction Projects.
and i want also say that we are not taking the input credit (paid on construction of rental premises) of Rental building.

can we take this issue to court ??.

will you change your advice given before ?

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CA Nikhil Jhanwar

CA Nikhil Jhanwar (Expert)
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24 April 2012 First let me know you nature of credit being taken and utilized by You . If you are not taking credit of input service and input used in construction, then what is the other source of credt.

As regards, challenging in court, I am also working on this issue and will be going to contest it court, but in our case dispute pertians to period prior to 04.01.2008

Querist : Anonymous

Querist : Anonymous (Querist)

25 April 2012 sir,
we are taking the input credit from these services:

01. Works contract services to contractors
02. Security services
03. Maintenance services
04. Advertisement services like hoarding, oline
05. Chartered accountant services
& etc.

since as per cenvat rules there is no co-relation between input credit of one services to other services.

thanks for your valuable comments.

regards

Imran

CA Nikhil Jhanwar

CA Nikhil Jhanwar (Expert)
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25 April 2012 It is clear that you are taking credit of Works contract service which is in relation to construction of premises only.

As per definition of ínput service' as provided in Cenvat Credit Rules, 2004 You are not eligible for credit Services you have referred at Point No. 01 and Point No. 03 as specifically excluded if used in respect of any service except specified service.

Credit in respect of Point NO. 02, 04, 05 are in nature of common service and you can take credit of the same.