2007 (8) TMI 587 - AT - Central Excise

Summary

Issues:
1. Waiver of pre-deposit of tax and penalty amount.
2. Interpretation of Rule 3(1) of Service Tax Rules, 2002 regarding utilization of service tax credit.

Analysis:
1. The applicant sought waiver of pre-deposit of tax and penalty totaling Rs. 2,46,021/- and Rs. 2,95,520/- respectively. The dispute arose from the utilization of service tax credit for payment of central excise duty, with the Department contending that such credit could only be used for service tax payment. The applicant argued that Rule 3(6) of Service Tax Rules, 2002 allowed credit on input services related to taxable services. The Tribunal directed a pre-deposit of Rs. 50,000/- within 6 weeks, with the remaining amount waived pending appeal disposal.

2. The crux of the issue involved interpretation of Rule 3(1) of Service Tax Rules, 2002 post-amendment on 14-5-2003. The rule stipulated that an output service provider could take credit of service tax as prescribed. The Tribunal deliberated on whether the applicant could utilize credit on input services linked to the taxable service of output service. The decision to allow such utilization was deferred pending a detailed appeal hearing, emphasizing compliance with the pre-deposit directive. The judgment highlighted the need for further examination to determine the applicant's entitlement to utilize the credit in question.

In conclusion, the judgment addressed the waiver of pre-deposit of tax and penalty amounts, emphasizing the need for compliance with the directive to deposit a specified sum pending appeal. The interpretation of Rule 3(1) of Service Tax Rules, 2002 regarding the utilization of service tax credit was a pivotal aspect, necessitating a detailed hearing to ascertain the applicant's entitlement.