2008 (4) TMI 727 - AT - Central Excise

Waiver of pre-deposit of amount demanded - penalty - CENVAT credit - Held that - the applicants have made out a strong prima facie case for the complete waiver of the pre-deposit of the amount demanded and the penalty imposed.

Summary

Issues:
1. Disallowance of input service tax credit related to various services.
2. Imposition of penalty on the applicants.
3. Admissibility of the appeal and stay petition.

Analysis:

Issue 1: Disallowance of Input Service Tax Credit
The Commissioner of Central Excise (Appeals) disallowed the input service tax credit amounting to &8377; 22,078/- in relation to Xerox Machine Maintenance, Air Travel Agent Service, Tourist Taxi Service, and Photography Services. The reason provided was the lack of evidence demonstrating these services' relevance to production or manufacture. The applicants argued that the maintenance of Xerox machines was essential for designing and manufacturing engineering equipment. They also justified the photographic services by explaining that they utilized photographs to create marketing materials for their products. Additionally, they claimed that air travel agent services and tours were crucial for marketing their goods. The Technical Member considered the arguments and case laws cited by the applicants, such as M/s Victor Gaskets India Ltd. and M/s Force Ltd. vs. CCE, Pune. Based on the prima facie case presented by the applicants, the Technical Member waived the pre-deposit of the service tax demanded, along with the penalty imposed, pending the appeal's disposal.

Issue 2: Imposition of Penalty
In addition to disallowing the input service tax credit, a penalty of &8377; 5000/- was imposed on the applicants by the Commissioner (Appeals). The applicants challenged this penalty, emphasizing the importance of the services in marketing and selling their manufactured goods. The Technical Member, after considering the arguments and relevant case laws, decided to waive the penalty along with the service tax pre-deposit, indicating a favorable view towards the applicants' contentions.

Issue 3: Admissibility of Appeal and Stay Petition
Although the amount involved in the case was relatively small, the Technical Member admitted the appeal due to the issue's recurring nature. The stay petition was also taken up for disposal, indicating a willingness to address the matter promptly despite the modest financial implications. The decision to admit the appeal and consider the stay petition highlighted the significance of the underlying issue and the need for a timely resolution.

In conclusion, the judgment by the Appellate Tribunal CESTAT Mumbai favored the applicants by waiving the pre-deposit of the service tax demanded, penalty imposed, and considering the arguments presented regarding the disallowed input service tax credit. The decision underscored the importance of providing evidence and legal justifications to support claims related to tax credits and penalties in indirect tax matters.