2010 (2) TMI 632 - AT - Service Tax

Waiver of pre-deposit cenvat credit of service tax - credit was denied on the ground that inputs service distributor was not registered with the Revenue - Notification No. 26/05-S.T, input service distributor was required to register with the Revenue authorities - Prior to this date the input service distributor was not required to get any registration - Thereafter Applicant applied for registration which was duly accepted by the Revenue Held that - no objection by the Revenue regarding eligibility of the credit - pre-deposit of amount of Service tax and penalties are waived

Summary

Issues:
1. Waiver of pre-deposit of service tax amount and penalties due to denial of credit by the adjudicating authority.
2. Dispute regarding the registration of the input service distributor and the validity of instruments issued before registration.

Analysis:
Issue 1: The Applicant sought waiver of pre-deposit of Service tax amount and penalties totaling Rs. 1,20,39,198/- due to denial of credit by the adjudicating authority. The authority contended that the credit was not available on instruments issued by the input service distributor before its registration on 30-8-2005. The Applicant argued that during the disputed period from 30-9-2004 to 29-8-2005, registration was not mandatory for input service distributors until the issuance of Notification No. 26/05-S.T. on 7-6-2005. The Applicant applied for registration on 21-7-2005, and upon approval on 30-8-2005, no objections were raised. The Applicant maintained that there was no dispute regarding the credit eligibility, rendering the demand unsustainable.

Issue 2: The Revenue contended that since the Applicant registered as an input service distributor only on 30-8-2005, any instruments issued before that date were not valid duty-paying documents for credit availing by different units. However, the Tribunal found merit in the Applicant's argument that registration was not required before 16-6-2005 and that the Applicant's subsequent registration was accepted by the Revenue without objections. Given the lack of dispute on credit eligibility, the Tribunal waived the pre-deposit of Service tax and penalties, staying the recovery during the appeal's pendency.

In conclusion, the Tribunal granted the Applicant's request for waiver of pre-deposit and stayed the recovery of the Service tax amount and penalties, considering the timeline of registration requirements for input service distributors and the lack of dispute on credit eligibility. The decision highlighted the importance of compliance with registration regulations and the impact on credit availability in tax matters.