Indirect tax credit for lift cannot be denied, a bench of Central Excise and Services Tax Appellate Tribunal (CESTAT) has said.

“The lifts are fitted into the building and do not have an impact on treatment of lifts as capital goods because even after fitting into the building, lift is a lift and covered under Chapter 84 (of Central Excise and Custom Tariff) and cannot be considered as input just to deny the benefit of CENVAT credit,” Bengaluru bench of CESTAT has said, while allowing appeal by Divya Sree R O W Projects LLP.

Engaged in the construction of a complex, building, civil structure, the appellant, imported passenger lifts and availed the credit of Counter Veiling Duty (CVD) paid. However, an audit team of CBIC raised objection on such credit.

‘Disallowance of credit’

Accordingly, a show cause notice (SCN) was issued to the firm for the demand/recovery of the credit. The Adjudicating Authority confirmed the demand of over ₹13 lakh and also imposed an equal penalty. Then, the Commissioner (Appeals) also confirmed the disallowance of the credit. Aggrieved, the appellant moved CESTAT.

The counsel for the appellant argued that construction of a complex, building, civil structure etc. is declared as a service under the law. Further, the service portion in works contract cannot be seen in isolation. It was also said that the tax authorities have resorted to artificial bifurcation on the activity into the material and provision of the service, ignoring the nature of work and the said interpretation is beyond the statutory provisions.

Lift is one of the common facilities provided in the project. The entire value of construction, including common facilities, are considered for payment of service tax. Lift is a capital good used for providing taxable services on which service tax is being paid by the appellant.

After going through all the submissions and perusal of the material on record, the bench found that when the passenger lift was imported, it was classified under Chapter 84 and the Classification was accepted by the Department. “Once the classification is accepted by the Department, it cannot be changed at the receiver’s end by the Department,” it said, while noting the fact that the appellant is fulfilling conditions to avail the credit.

‘Interesting favourable ruling’

The bench said that basis such as lifts were not used in providing service but used in supply of material, for denying credit is not legally sustainable. It concluded by saying that the “appellant is entitled to CENVAT credit on lift which is capital goods.”

Harpreet Singh, Partner with KPMG said that this is an interesting favourable ruling, as generally, even under GST input credit of lifts or other capital goods which get affixed/ attached to the building is denied by the authorities on the pretext that the same is an immovable property.

“The observation that once the ‘classification of lifts is accepted by the Department, it cannot be changed at the receiver’s end by Department’, is plausible and definitely a terra firma that is likely to be used by others in future,” he said.

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