C.C.E. & S.T.-Surat-i  VERSUS LAKHANI DESAI DEVELOPERS

Excise Appeal No. 10500 of 2022-DB

Excise/Stay/10251/2022

(Arising out of OIA-CCESA-SRT-APPEAL-PV-041-2022-23 Dated- 02/06/2022 passed by

Commissioner of Central Excise, Customs and Service Tax-SURAT-I)

 

C.C.E. & S.T.-Surat-i 

VERSUS

LAKHANI DESAI DEVELOPERS

 

APPEARANCE:

Shri. R. P. Parekh, Superintendent (AR) for the Appellant

Shri. Abhay Y. Desai, Chartered Accountant for the Respondent

CORAM:

HON’BLE MR. RAMESH NAIR, MEMBER (JUDICIAL)

HON’BLE MR. RAJU, MEMBER (TECHNICAL)

Final Order No. A/ 10104 /2023

DATE OF HEARING:21.09.2022

DATE OF DECISION:20.01.2023

RAMESH NAIR

The present appeal has been filed by the Revenue being aggrieved

with the Order-in-Appeal No. CCESA-SRT(APPEAL) PV-041/2022-23 dated

02.06.2022 passed by the Learned Commissioner (Appeals), Surat.

Briefly stated, the facts of the case are that on the basis of

intelligence, a search was conducted at the premises of respondent and it

was noticed by the department that respondent had constructed 166 flat in

their project „Atlantis‟ having 4 towers (A,B,C & D) and out of which 46 flats

were booked/sold before issuance of completion certificate i.e. BUC and they

had paid the service tax on the payment received, while remaining 120 flats

were unsold/ remained unsold after issuance of BUC, where the entire

consideration/payment was received or to be received after receipt of

completion certificate/BUC as a sales of goods/immovable property on

payment of state sale Tax/VAT. It appeared that respondent was required to

reverse the proportionate amount of Cenvat credit after receipt of 

completion certificate (BUC). On further investigation, it was revealed that

proportionate amount of Cenvat credit worked out to Rs. 59,95,577/-.

Therefore, show cause notice dated 11.09.2017 was issued to the

respondent demanding Cenvat credit along with interest and proposing

imposition of penalty, which was adjudicated vide OIO dated 29.12.2017.

Against the said order, the respondent preferred an appeal before the

Commissioner (Appeals), who vide OIA dated 26.11.2018, rejected the

appeal of respondent. The respondent thereafter filed an appeal before

CESTAT and vide final order dated 23.01.2020 CESTAT remanded the matter

back to the adjudicating authority for fresh adjudication. In remand

proceeding Ld. Joint Commissioner vide OIO dated 30.12.2020 confirmed

the Cenvat demand and imposed the penalty. Being aggrieved, respondent

filed appeal before the Commissioner (Appeals), Surat, who vide impugned

order allowed the appeal of respondent on merit and remit the matter back

to adjudicating authority for the quantify the proportionate credit. Hence the

present appeal by the department against the impugned Order-in-Appeal.

Shri. R P. Parekh, Superintendent (Authorized Representative)

appearing for the Revenue Department justified the order of the review

authority and submits that the Learned Commissioner (Appeals), has not

appreciated the facts that the respondent rendering taxable and exempted

services both but they were availing Cenvat credit of input services for the

entire taxable and exempted services and hence Rule 6 of Cenvat Credit

Rules, 2004 applicable. The credit of input services in respect of the

Tower/Buildings were not admissible to the assessee post issuance of

completion certificate but they continued to avail the credit in gross violation

of Rule 6(1) of the Cenvat Credit Rules, 2004 without maintaining any

separate account of the receipt and use of input services in respect of the

said Towers/Building as required under Rule 6(2) of the Cenvat Credit Rules,

2004. They did not follow the statutory procedure as prescribed under Rule 6

of the Cenvat Credit Rules, 2004, for reversal of the Cenvat credit, thus the

respondent has no other option and they were required to reverse Cenvat

Credit in terms of Rule 6 (3) of the Cenvat Credit Rules, 2004

3.1 He also submits that when the respondent started the project, they

were very well aware of the provisions of Rule 6 (1) of Cenvat Credit Rules,

2004, that they would not be allowed to avail credit of service tax paid on

input services if the output service are exempted services and that they may

have to reverse the cenvat credit taken by them in terms of statutory 

provisions of Rule 6(3) of Cenvat Credit Rules, 2004. It is settled legal

position that, if law prescribed certain thing to be done in certain manners

only then it has to be done in such prescribed manner only. He placed

reliance on the decision of JK Housing Board and Other Vs. Kunwar Sanjay

Kishan Kaul – (2011) 10SCC 714.

3.2 He further submits that the Ld. Commissioner by relying the Judgment

of the Hon‟ble High Court in case pf Principal Commissioner Vs. Alembic Ltd.

– 2019(29)GSTL 625 (Guj.) has held that, upon receipts of completion

certificate for the projects, the output activity of sale of residential units

become “non-service” as per provisions of Section 65B of the Finance Act,

1994 read with definition of the term “exempt service” under Rule 2 (e) of

the CCR, 2004 and hence mischief of Rule 6 of CCR, 2004 was not

applicable. However, after holding the output activity as non-service, in such

circumstance it turned into grave error by allowing the availment of Cenvat

credit to the respondent because when the output activity of the sale of

residential units after receipts of Completion Certificate was non-service,

then the entire beneficial scheme of Cenvat Credit was not available to them

because it was not output service at all and the respondent cannot keep the

benefit of cenvat credit availed for the activities which were not service.

3.3 He also submits that instant matter which was decided by the

Commissioner (Appeals), on the basis of the Judgment of Hon‟ble High Court

of Gujarat in the case of the Principal Commissioner Vs. M/s Alembic Ltd.

was not accepted by the department at all and the same was appealed

before the Hon‟ble Supreme Court of India and outcome of the departmental

appeal filed before the Hon‟ble Supreme Court of India i.e Special leave

Petition is still awaited.

Shri. Abhay Y. Desai, Learned Advocate appeared on behalf of the

respondent submits that issue involved in the present matter is in respect of

reversal of Cenvat Credit of input services availed during the construction

phase on account of unsold units at the time of grant of completion

certificate /BUC. The given issue stands settled in respondent‟s favour by the

decision of M/s Alembic Ltd. supra. The Hon‟ble Supreme Court has not

granted the stay in the matter of department SLP filed against the decisions

of Hon‟ble Gujarat High Court. In the absence of any stay granted by the

Hon‟ble Supreme Court, the decision of M/s Alembic supra deserve to be 

followed and accordingly the captioned appeal along with deserves to be

dismissed.

4.1 He also submits that the Ld. Commissioner (Appeals), while allowing

respondent appeal, has erred on facts and in law in terms of remanding the

case to the Ld. Adjudicating to verify whether respondent have availed any

Cenvat post the receipts of the completion certificate. It is undisputed facts

that respondent have not availed any Cenvat Credit post 13.07.2016. Hence,

pray that in such facts and circumstance of the case the impugned OIA

deserves to be modified in terms of quashing the directions of the remand.

Heard both sides and perused the appeal records.

We have carefully perused the order of the Learned Commissioner

(Appeals) which was challenged before us by the revenue. There are various

findings of fact recorded by the Ld. Commissioner (Appeals). One of the

findings of fact recorded by the Commissioner (Appeals) is in paragraph 13

which reads thus:

“ 13. As the quantum of such cenvat credit on input services, is not

forthcoming from the records available with office, I hereby remit the

matter back to adjudicating authority for the limited purpose to quantify

the said proportionate credit by following the principles of natural justice

in the matter in terms of the above directions alongwith the interest and

penalty thereof. In view of the above, I set aside the impugned order to

the afroresaid extent and remand the matter to adjudicating authority for

the purpose of quantification only in terms of above directions.

From the above finding of the Ld. Commissioner (Appeals), it is observed

that matter was remanded only for requantification. The respondent

vehemently objected to the remand made by the Ld. Commissioner

(Appeals). However, the respondent without challenging the impugned

order by filing an appeal or cross objection can not seek the quashing of

the direction of the Ld. Commissioner (Appeals) for remand for

requantification. Hence the submission of the respondent in this regard is

rejected.

6.1 Further we find that the Ld. Commissioner (Appeals), decided the

subject disputed matter on the basis of judgment of M/s Alembic Ltd. supra

only and grievance of the revenue is that departmental appeal is pending

against the decisions of said order. In these circumstances, we are of the

view that the matter should be remanded to the original adjudicating

authority to decide the matter afresh on the basis of outcome of the

departmental appeals filed before the Hon‟ble Supreme court of India. While 

remanding the matter we make it clear that we are not expressing any

opinion on the merits of any issue in the matter and keeping all the issues

open for the consideration.

In view of above, appeals are allowed by way of remand to the original

adjudicating authority. Since, the appeal itself is disposed of. The stay

application became infructuous and disposed of accordingly.

(Pronounced in the open court on 20.01.2023)

(RAMESH NAIR)

MEMBER (JUDICIAL)

(RAJU)

MEMBER (TECHNICAL)