"ST/418/2012 Page 1 of 9 CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL BANGALORE REGIONAL BENCH - COURT NO. 2 Service Tax Appeal No. 418 of 2012 (Arising out of Order-in-Original No.193/2011 dated 30.11.2011 passed by the Commissioner of Service Tax, Bangalore.) M/s. Divyasree Holdings Private Limited ‘Divyasree Chambers’ No.11, A Wing, Oshangnessy Road, Bangalore – 560 025. Appellant(s) VERSUS The Commissioner of Service Tax No.16/1, 5th Floor, S.P. Complex, Lalbagh Road, Bangalore – 560 027. Respondent(s) APPEARANCE: Shri Akbar Basha, Chartered Accountant for the Appellant Shri M. A. Jithendra, Authorised Representative for the Respondent CORAM: HON'BLE MR. P.A. AUGUSTIAN, MEMBER (JUDICIAL) HON'BLE MRS. R. BHAGYA DEVI, MEMBER (TECHNICAL) Final Order No. 21293 /2025 DATE OF HEARING: 24.04.2025 DATE OF DECISION: 26.08.2025 PER : R. BHAGYA DEVI This Appeal is filed by the Appellant M/s. Divyasree Holdings Pvt. Ltd. against Order-in-Original No. 193/2011 dated 30.11.2011 passed by the Commissioner of Service Tax, Bangalore. 2. The appellant M/s. Divyasree Holdings Pvt. Ltd. are registered under the category of Construction Services, Goods Transport Agency and Renting of Immovable Property Services. ST/418/2012 Page 2 of 9 The audit party on verification of records observed that the appellant had availed cenvat credit on various input services and utilized the same for payment of service tax on renting of immovable property service. The Commissioner in the impugned order observed that the various input services had no nexus with the taxable output service. Since the input services were availed for the construction of the commercial complex which was immovable property, it was held that these services are used in the manufacture of immovable property on which no duty or service tax is paid and hence, the question of availing cenvat credit did not arise. Accordingly, referring to the definitions of ‘input’ and ‘input service’ as specified under Rule 2(k) and 2(l) of Cenvat Credit Rules, 2004, the credit was denied and the impugned order confirmed an amount of Rs.92,10,557/- along with the interest and also imposed penalty under Section 78 of the Finance Act, 1994. Aggrieved by this order, the appellant is in appeal before us. 3. The Learned Chartered Accountant submitted that the appellant had availed cenvat credit on various input services such as telephone services, banking services, chartered accountant services, general insurance service, security services, real estate services, electrical installation services, consultancy services, erection commissioning services, management maintenance and repair services, architecture services, construction services etc.; Referring to the definition of ‘input service’, it is submitted that it does not restrict the credit for services relating to renting of immovable property services. It is also submitted that the issue is no longer res integra since the various appellate authorities have held that there cannot be one to one nexus between the input services and the output services as long as there is no dispute that the input services were used and the output services were liable to service tax. The following decisions are relied upon: • Bharati Realty Ltd. vs. CST, Delhi-III: 2022(65) G.S.T.L. 234 (Tri-Del.) ST/418/2012 Page 3 of 9 • Mysore Holdings Pvt. Ltd. vs. CST, Bangalore: 2017(52) S.T.R. 70 (Tri-Bang.) • Pesico India Holdings Pvt. Ltd. vs. CCT, Tirupati: 2011 (23) S.T.R. 341 (Α.Ρ.) • CCE, Visakhapatnam-II vs. Sai Sahmita Storages (P) Ltd.: 2012 (28) STR 166 (Tri.-Ahmd.) • Navaratna S.G. Highway Prop. Pvt. Ltd. vs. CST, Ahmedabad: 2012(28) S.T.R. 166 (Tri-Ahmd.) • Vodafone Mobile Services Ltd. vs. CST, Delhi: 2019(27) G.S.T.L. 481 (Del.) • Chief Commissioner of CGST vs. Safari Retreats Pvt. Ltd.: 2024(90) G.S.T.L. 3 (S.C) 4. The learned Authorized Representative (AR) for the Revenue reiterated the findings of the Commissioner in the impugned order and submitted that the appellant is not eligible to avail the cenvat credit since the credit is availed on the construction services on which no service tax is being discharged and the output service i.e., renting of the commercial property has no nexus with the input services. 5. Heard both sides. The only issue to be decided is whether the appellant is eligible to avail cenvat credit on the input services used in the construction of services of the commercial complex which are ultimately being rented out on which service tax is being discharged. This issue is no longer res integra in as much as it stands settled by various decisions of the Tribunal and the Principal Bench in the case of Bharti Realty Limited vs. Commissioner of Service Tax, Delhi III: 2022 65 GSTL 234 (Tri-Del) in a similar set of facts observed as follows: “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 ST/418/2012 Page 4 of 9 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 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 v. Sai Samhita Pvt. Ltd. [2011 (23) S.T.R. 341 (A.P.)], 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 ST/418/2012 Page 5 of 9 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; 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. ST/418/2012 Page 6 of 9 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. 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. ST/418/2012 Page 7 of 9 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 order of the Larger Bench of this Tribunal. The question framed by the Chhattisgarh High Court were as follows: ST/418/2012 Page 8 of 9 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 7-7-2009, 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 v. Commissioner of Central Excise, Mumbai-II [2018-TIOL-262-SC-CX-LB] (sic) 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, however, find that there is no stay on the decision of jurisdictional High Court in Vodafone Limited. The decision of the Delhi High Court is binding on this Bench. 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 ST/418/2012 Page 9 of 9 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”. 6. In the instant case also, cenvat credit is denied only on the ground that the input services had no nexus with output services for the reason that the input services were used for the construction of immovable property, which was later on rented; on which service tax being paid under the category of ‘Renting of Immovable Property’. In view of the above, observations of the Commissioner in the impugned order are set aside and the appeal is allowed. (Order pronounced in Open Court on 26.08.2025.) (P.A. AUGUSTIAN) MEMBER (JUDICIAL) (R. BHAGYA DEVI) MEMBER (TECHNICAL) rv "