Credit Allowable on Service Tax Paid on Architectural Services: CESTAT Hyderabad
This appeal is directed against order-in-appeal No. HYD-SVTAX-000-APP-0009-17-18-ST dated 17.04.2014
2. Heard both sides and perused the records.
3. In this case, the appellant is contesting mainly the rejection of the refund claims filed by them in respect of unutilised CENVAT credit on input services which were utilised by the appellant for rendering of exported output services. It is undisputed that appellant has exported the services and claimed the refund. The 1stAppellate Authority has allowed refund claims and has denied the refund claim in respect of few services.
4. It transpires from the records that appellant is contesting the rejection of refund claim of an amount of Rs 10,20,159/- in respect of CENVAT credit paid on service tax for architectural design consultancy; insurance for motor vehicles to an extent of an amount of Rs 1,92,002/-; rejection of refund claims for out-of-pocket expenses for the Chartered Accountants of an amount of Rs 514/- and for services of Nagadi Consultants Pvt Ltd of Rs 5,686/- for mobilisation of equipment, sinking borewell etc. and service tax paid on liaisoning with the authorities for obtaining environmental clearances for setting up new facility at Noida. It transpires from order-in-appeal that in respect of all the above services the 1st Appellate Authority has remanded the matter back to the lower authority for verification and ruling on admissibility. The appellant is aggrieved by the impugned order in respect of architectural consultancy services stating that the 1st Appellate Authority has considered the same as works contract services which is incorrect and submits that the said observations may be set aside.
5. Learned D.R. reiterates the findings of the 1stAppellate Authority.
6. It is seen from the table in the order-in-original that while denying the CENVAT credit and the refund of service tax paid on architectural consultancy services, the 1stAppellate Authority has recorded the following findings.
“It is clear from the purchase order that M/s Edifice has not been awarded an architectural design contract simplicitor; but a comprehensive contract covering conceptualization, design, drawings, their approval by Noida, floating of tender, actual construction of the new facility/premises, payment in instalments for the civil works, based on stages of finishing, and final billing. The total contract is for Rs 1,06,24,879/-. The contract essentially requires the delivery of the physical premises designed and approved. This is clearly excluded by clause(A) under rule 2(l)of the CCR 2004. Denial of credit/refund on this element is legally sustainable and upheld.”
On perusal of invoices which are annexed to the appeal memoranda at page 64,65 & 66, I find that M/s Edifice Consultants Pvt Ltd have paid the service tax liability under architectural services. I called for the agreement/purchase order issued by appellant to M/s Edifice Consultants Pvt Ltd and on perusal of the same I find that appellant had appointed Edifice Consultants Pvt Ltd for architectural consultancy along with conceptualising, designing etc. in respect of activity of construction of building. The said purchase order, in my considered view, is for architectural expertise in construction of the building and cannot be termed as works contract as is sought to be done so by the 1st appellate authority. The lower authorities have also held that these construction services are excluded but in my view the services being architect services does not fall under exclusion to the definition of input service as per rule 2 (l) of CENVAT Credit Rules 2004, as the said exclusion is in respect of execution of works contract. The period involved in this case is January 2015 to March 2015 and the definition has undergone a change on 01.04.2011 and subsequently again on 01.07.2012 wherein the specific exclusion is only for the service portion in execution of works contract and construction services listed under Clause B of Section 66E of the Finance Act which does not include the architectural services. In my considered view the above findings of the 1st Appellate Authority for rejecting the refund claim of the service tax paid on architectural services seems to be incorrect and I agree with his view that the lower authorities should be given an opportunity for verification of the documents for sanctioning of the refund claims.
7. Appeal to the extent as indicated hereinabove is allowed and the impugned order to that extent is set aside.
(Operative portion of the Order pronounced in open court on conclusion of the hearing )