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1. These two appeals are filed by the appellants on the same issue and hence they are being disposed of together. Service Tax Appeal No. 52469 of 2016 is filed by M/s Bharti Reality Limited¹ assailing the Order-in-Original No. DLI-SVTAX-003- COM-53-15-16 dated 31.03.2016 passed by the Commissioner of Service Tax, III. Excise Appeal No. 52612 of 2016 is filed by M/s Nile Tech Limited² assailing the Order-in-Original No. DLI- SVTAX-003-COM-55-15-16 dated 13.06.2016 passed by the Commissioner of service tax, Delhi III. The orders-in-Originals and periods of dispute in the two appeals are as follows:

Service Tax Appeal No. 52469 of 2016

Service Tax Appeal No. 52612 of 2016

1 Bharti

2 Nile

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2. We have heard learned counsel for the appellants and learned authorised representative for the Department.

3. The appellants Nile and Bharti had constructed buildings which they rented for commercial purposes and paid service tax under the head of "renting of immovable property Service". The appellants had taken CENVAT credit of service tax paid on "input services" and excise duty paid on inputs and capital goods used for construction of the buildings and utilised the same for payment of service tax on "renting of immovable property service".

4. Show cause notices were issued to the appellants seeking to deny and recover the CENVAT credit so availed on the ground that the inputs, input services and capital goods resulted in creation of immovable property which is neither goods nor services as clarified by the CBEC Circular No. 98/1/2008-ST dated 04.01.2008 and CBEC Instruction No. 267/11/2010-CX dated 08.07.2010 and, therefore, no CENVAT credit is available.

5. The impugned order denies CENVAT credit on this ground and has ordered its recovery from the appellants. In the case of Bharti, a penalty equal to service tax was also imposed under Rule 15 of CENVAT Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 and a penalty of Rs. 10,000/- was imposed under Section 77 of the Finance Act, 1994.

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6. The appeals are filed by the appellants on the following grounds:

(i) The appellants are eligible to avail CENVAT credit on inputs, input services and capital goods. The inputs included SS structures and parts thereof and clear touch glass and capital goods included panel and panel board, UPS system, transformers and panel and parts thereof while the input services included Architecture Services, Design Services, "Erection, Commission and Installation Services",

"Management, Maintenance and Repair Services",

"Security Agency Services", "Works Contract Services", "Legal Consultancy Services", cleaning services, etc. All these inputs and input services have resulted in construction of the buildings which were rented out and appropriate amount of service tax on renting of immovable property service has been paid. Therefore, all these are eligible as inputs and input services under CENVAT Credit Rules, 2004. Reliance was placed on the following case laws:

(a) Regency Park Property Management Services Pvt Ltd. vs. Commissioner, Service Tax, Delhi.³

(b) Indore Treasure Market City Pvt Ltd. vs. Commissioner, CGST & Central Excise,⁴

(c) Mark Soft Tech Pvt Ltd. vs. Commissioner of Central Excsie & Service Tax,⁵

3 2020-TIOL-549-CESTAT-DEL 4 2021-TIOL-582-CESTAT-DEL 5 2018-TIOL-3692-CESTAT-HYD

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(ii) The definition of "input service" was amended by Notification No. 3/2011-CE(NT) dated 01.04.2011, whereby the services used for construction of a building have been specifically excluded from the ambit of "input services" eligible for CENVAT with effect from 01.04.2011. The amendment was not retrospective and was only prospective. This was clarified by CBEC Circular No. 943/04/2011-CX dated 29.04.2011, wherein it has been stated that the CENVAT credit on "input service" will be available if the services had been provided before 01.04.2011. In these two appeals the relevant period of dispute is 01.04.2008 to 31.03.2011 and, therefore, CENVAT credit on input services used in construction of a building is admissible.

(iii) Emergence of an immovable structure at an intermediate stage cannot be the ground to deny CENVAT credit even if such an immovable structure is neither good nor as service. What is important is that the service was rendered and service tax was paid under the head of "renting of immovable property services" and all the inputs, capital goods and input services in dispute have gone into providing the taxable service. Reliance was placed on the following case law:

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(a) Mundra Ports & Special Economic Zone Limited v. Commissioner of Central Excise & Customs,⁶.

(b) Commissioner of Central Excise, Visakhapatnam-II vs. Sai Samhita Storages (P) Limited,⁷

(c) Vandana Global Limited vs. Commissioner of Central Excise and Customs⁸, affirmed by the Hon'ble Supreme Court⁹

(d) Dymos India Automotive Pvt. Ltd. vs. Commissioner of Central Excise, Chennai IV¹⁰ upheld by Hon'ble Madras High Court¹¹

(e) Vodafone Mobile Services Ltd. vs. Commissioner of Service Tax, Delhi,¹² affirmed by Hon'ble Supreme Court¹³

(f) Bharti Hexacom Ltd. vs. Commissioner of Central Excise & Customs, CGST, Jaipur,¹⁴

(g) Kellogg India Pvt. Ltd. vs. Commissioner of Central Tax, Tirupathi,¹⁵

(h) Pepsico India Holdings Pvt. Ltd. vs. Commissioner of Central Tax, Tirupati,¹⁶

(i) GMR Hyderabad International Airport Ltd. vs. Commissioner of Central Excise, Hyderabad,¹⁷

(j) SMC Power Generation Ltd. v. Commissioner of Central Excise, Orissa¹⁸

(k) Indian Oil Corporation Ltd. v. Commissioner of Central Excise & Service Tax¹⁹

(iv) The extended period of limitation cannot be invoked and the entire demand is time barred and interest of penalty is also not payable.

6 2015 (39) STR 726 (Guj)

7 2011 (23) STR 341 (AP)

8 2017-TIOL-2853-HC V. CHHATTISGARH-CX 9 2018 TIOL-262-SC-CX-LB

10 2018-TIOL-1116-CESTAT-MAD, 11 2018-TIOL-1947-HC-MAD-ST 12 2018-TIOL-2409-HC-DEL-ST 13 2019-TIOL-309-SC-ST

14 2021-TIOL-305-CESTAT-DEL 15 2020-TIOL-1040-CESTAT-HYD 16 2021-TIOL-448-CESTAT-HYD 17 2019-TIOL-1416-CESTAT-HYD 18 2020-TIOL-937-CESTAT-KOL 19 2020-TIOL-184-CESTAT-CHD

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7. One behalf of the Department the following submissions were made:

(i) CENVAT credit on cement, steel and cooling tower were used in the construction of the building which is immovable property not subject to excise duty nor service subject to service tax and, therefore, no CENVAT credit is admissible. Reliance was placed upon the decision of the Tribunal in

Mundra Port & Special Economic Zone vs. Commissioner of Central Excise, Raikot²⁰.

Although this decision was reversed by the High Court of Gujarat in²¹, the judgment of Gujarat High Court was challenged before the Supreme Court by Special Leave Petition (C) 33238/2015 and is pending.

(ii) The Larger Bench of the CESTAT, in Vandana Global vs. Commissioner of Central Excise and Customs, Raipur (Chhattisgarh)²² held that goods like cement, steel etc., used for laying foundation for building supporting structures cannot be treated as inputs in relation to final products and, therefore, no credit of duty is admissible on them. This decision was reversed by the Chhattisgarh High Court in Vandana Global vs. Commissioner of Central Excise 20 2009 (13) STR 178 (Tri-Ahmd)

21 2015 (39) STR 726 (Guj)

22 2010 (253) ELT 440 (Tri.-LB)

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and Customs, Raipur (Chhattisgarh)²³. The decision of the High Court was challenged before the Supreme Court in Special Leave Petition (C) 18266/2018. The Supreme Court has tagged this appeal with these appeals filed by the Revenue in

Mundra Ports and in Vandana Global. In

Bharti Airtel Limited vs. Commissioner of Central Excise, Pune²⁴, CESTAT held that after issue of Notification No. 16/2009-CE (NT) the term

"inputs" does not include cement, angles, channels TT Bars, TMT bars and other items used for construction of a factory shed, building, laying foundation or making structures for support of capital goods. This decision was upheld by the Bombay High Court in Bharti Airtel Limited vs. Commissioner of Central Excise, Pune²⁵

following the judgment of the Bombay High Court in Vodafone India Limited vs. Commissioner of Central Excise, Mumbai-II²⁶. The assessee appealed against the judgment of Bombay High Court judgments and Civil Appeal No. 10409- 10410/2014 are pending before the Supreme Court.

(iii) The Larger Bench of the CESTAT has in Tower Vision vs. Commissioner of Central Excise, 23 2018 (16) GSTL 462 (Chhattisgarh) 24 2013 (29) STR 401 (Tri.-Mumbai) 25 2014 (35) STR 865 (Bom.)

26 2015 (40) STR 422 (Bom)

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(Adj), Delhi²⁷ held that MS angles and Channels, etc used for erection of Mobile towers are not eligible for CENVAT credit, which decision was reversed by the Delhi High Court in Vodafone Mobile Services Limited vs. Commissioner of Service Tax, Delhi²⁸. Civil Appeal No. 5037 of 2021 and 5038 of 2021 filed by the Revenue against the Delhi High Court judgment is pending. A summary of the various cases is pending before the Supreme Court is as follow:

(iv) As the matter is pending before the Supreme Court, reliance should not be placed on the decision of the Delhi High Court in Vodafone Mobile or the judgment of the Gujarat High Court in Mudra Port.

27 2016 (42) STR 249 (Tri.-LB)

28 2019 (27) GSTL 481(Del.)

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8. We have considered the submissions advanced on behalf of both the sides and have perused the records.

9. The short question to be answered is whether inputs, capital goods and input services which are used for construction of buildings and structures, which are then used for providing services are eligible for CENVAT credit or not.

10. The case of the Revenue is that neither these inputs and capital goods nor the input services are directly used for providing services but they are used for construction of immovable property which is neither a good nor a service. Therefore, the inputs, capital goods and input services which go into creation of such an immovable property does not qualify as input, capital goods service or input service under the CENVAT Credit Rules, 2004.

11. The case of the appellant is that the immovable property is a structure which comes in the process of providing taxable service. It is not being constructed for its own sake but is being built with the intention of providing taxable service. It has been used for providing taxable service and service tax has been paid on such taxable service. Therefore, the appellants are entitled to CENVAT credit as input, capital goods and input services are directly relatable to the taxable service which it is providing. Rendering taxable service is impossible where the structure comes into existence and the structure will come into existence only with the help of inputs, capital goods and input services. The mere fact that the structure is attached to the earth does not

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dilute the fact that it is being used for providing a taxable service.

12. We find that this issue was addressed by various High Courts. In Commissioner of Central Excise, Visakhapatnam vs. Sai Samhita Pvt Ltd.²⁹, the High Court of Andhra Pradesh has decided that CENVAT credit is admissible on cement and TMT bars for construction of warehouses by M/s Sai Samhita who were providing storage and warehousing services. The relevant portion of this judgment is reproduced below:

"The only allegation against the assessee is that they claimed CENVAT credit irregularly with reference to cement and TMT bars used in the construction of warehouses through which the storage and warehousing services are provided by the assessee. Section 65(102) of the Finance Act defines "storage and warehousing" as to include storage and warehousing services for goods including liquids and gases but does not include any service provided for storage of agricultural produce or in service provided by cold storage. As per Section 65(105)(zza), read with Section 66 of the Finance Act, there shall be levied tax on storage and warehousing services at 12% of the value of taxable service. The service tax payable is determined in accordance with Section 67(4) read with the Service Tax Rules, 1994 made in exercise of the powers under Section 94 of the Finance Act. There is no dispute that every provider of taxable service is entitled to claim CENVAT credit in relation to input service. Rule 2(k) and (l) of the Rules are relevant and they read as under.

2. Definitions.-

(k) "input" means-

(i) all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production;

(ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service;

29 2011 (23) STR 341 (AP)

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Explanation 1. - The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.

Explanation 2. - Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer;

(l) "input service" means any service,-

(i) used by a provider of taxable service for providing an output service; or

(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal.

7. A plain reading of both the above definitions would show that, unless excluded, all goods used in relation to manufacture of final product or for any other purpose used by a provider of taxable service for providing an output service are eligible for CENVAT credit. In Maruti Suzuki Ltd. v. Commissioner of Central Excise, Delhi-III, (2009) 9 SCC 193 = 2009 (240) E.L.T. 641 (S.C.) the Supreme Court laid down as follows.

9. Coming to the statutory definition of the word "input" in Rule 2(g) in the CENVAT Credit Rules, 2002, it may be noted that the said definition of the word "input" can be divided into three parts, namely:

(i) specific part

(ii) inclusive part

(iii) place of use

10. Coming to the specific part, one finds that the word

"input" is defined to mean all goods, except light diesel oil, high speed diesel oil and petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not. The crucial requirement, therefore, is that all goods "used in or in relation to the manufacture" of final products qualify as "input". This presupposes that the clement of "manufacture" must be present.

8. Yet again considering the inclusive part of the definition of

"input", it was held as follows.

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All these considerations become relevant only when they are read with the expression "used in or in relation to the manufacture of final product" in the substantive/specific part of the definition. In each case it has to be established that inputs mentioned in the inclusive part is "used in or in relation to the manufacture of final product". It is the functional utility of the said item which would constitute the relevant consideration. Unless and until the said input is used in or in relation to the manufacture of final product within the factory of production, the said item would not become an eligible input. The said expression "used in or in relation to the manufacture" have many shades and would cover various situations based on the purpose for which the input is used. However, the specified input would become eligible for credit only when used in or in relation to the manufacture of final product. Hydrogen gas used in the manufacture of sodium cyanide is an eligible input, since it has a significant role to play in the manufacturing process and since the final product cannot emerge without the use of gas. Similarly, Heat Transfer Oil used as a heating medium in the manufacture of LAB is an eligible input since it has a persuasive role in the manufacturing process and without its use it is impossible to manufacture the final product. Therefore, none of the categories in the inclusive part of the definition would constitute relevant consideration per se. They become relevant only when the above crucial requirement of being

"used in or in relation to the manufacture" stands complied with. In our view, one has to therefore read the definition in its entirety.

9. There is no dispute, in these cases, that the assessee used cement and TMT bar for providing storage facility without which storage and warehousing services could not have been provided. Therefore the finding of the original authority as well as the appellate authority are clearly erroneous, which was correctly rectified by the CESTAT. In so far as the levy of penalty under Rule 15(2) of the Rules is concerned, unless and until there is a finding that there was suppression of fact, and irregular claim of CENVAT credit, the question of levying penalty under Rule 15(2) of the Rules docs not arise. In that view of the matter, the order levying penalty was rightly set aside by the CESTAT.

10. These two appeals, for the above reasons, are, accordingly, dismissed. No costs."

13. The judgment of the Andhra Pradesh High Court in Sai Samhita was referred to by the Gujarat High Court in Mudra Port and CENVAT credit was allowed on the inputs used for construction of jetty.

14. In Vandana Global Limited, the High Court of Chhattisgarh disposed of the bunch of appeals reversing the

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order of the Larger Bench of this Tribunal. The question framed by the Chhattisgarh High Court were as follows:

4. In the light of the contents of the impugned order of the Tribunal and submissions of the Assessee and the Revenue following substantial questions of law are formulated for consideration:

(A) Whether the terms „capital goods" excluded the structures embedded in earth?

(B) Whether the goods like angles, joists, beams, bars, plates, which go into fabrication of such structure are not to be treated as „input" used in relation to their final products as inputs for capital goods, or none of the above?

(C) is the amendment brought in CENVAT Credit Rules, 2004 as per Rule 2 of the CENVAT (Amendment) Rules, 2009 retrospective in nature considering is it clarificatory to be applied to all matters which arise before 07.07.2009, the date of commencement of the CENVAT (Amendment) Rules, 2009:

hereinafter referred to as "Amendment Rules".

15. All the questions were answered in favour of the assessee and against the Revenue. In the case of Vodafone India Limited vs. Commissioner of Central Excise, Mumbai II³⁰ the Bombay High Court held that no CENVAT credit is admissible on the inputs used in construction of the towers. Jurisdictional High Court of this Bench, viz, Delhi High Court has, in the case of Vodafone, on the other hand, held that CENVAT credit is admissible on the inputs and input services used for construction of the towers.

16. The submission of the Revenue is that the appeals filed before the Supreme Court in these matters are pending. We,

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17. We also find substance in the submission of the appellants on merits as it is undisputed that the appellants are engaged in providing renting of immovable property service and all the inputs, capital goods and input services which are in dispute were used for construction of buildings which were then rented out and service tax was paid on the renting of immovable property service.

18. The only question which remains is whether, by virtue of the fact that the building which emerges is neither a good nor a service, the appellant can be denied CENVAT credit. The jurisdictional Delhi High Court in Vodafone has held in favour of the appellant.

19. Thus, the appellants are entitled to the disputed CENVAT credit. Consequently, the impugned orders seeking to deny and recover CENVAT credit along with interest and seeking to the impose penalties cannot be sustained. Consequently, both the appeals are allowed and impugned orders are set aside with consequential relief, if any, to the appellants. (Order pronounced on 09.05.2022)

(JUSTICE DILIP GUPTA)

PRESIDENT

(P V SUBBA RAO)

MEMBER (TECHNICAL)

Tejo