2013 (10) TMI 1442 - AT - Service Tax

Summary

Issues involved: Cenvat credit denial u/s Rule 6(3) of Cenvat Credit Rules, 2004; Applicability of Composition Scheme for payment of Service Tax on works contract service.

Cenvat Credit Denial: The appellant, a manufacturer of MS Pipes, had Cenvat credit denied on the grounds that their Head Office, registered for payment of Service Tax, was availing the benefit of Composition Scheme for works contract service. The Revenue contended that since the Head Office was a service provider under the Composition Scheme, the appellant could not have taken the credit of duty on inputs used in manufacturing pipes. However, the appellant argued that once duty was paid on the pipes, if the Head Office did not avail the credit of excise duty paid on the pipes, both the service provider and manufacturer were not in violation of the Central Excise Act.

Composition Scheme Applicability: The Tribunal found merit in the appellant's argument that the Head Office, as a service provider, had not taken the credit of excise duty paid on the pipes, making them eligible for the Composition Scheme. It was noted that duty had been paid on the MS Pipes and credit had been utilized. The Tribunal concluded that the appellant had followed the correct procedure, justifying a bona fide belief that Cenvat credit was entitled to them. Consequently, the Tribunal ordered a waiver of pre-deposit of disputed dues and a stay against recovery during the pendency of the appeal.