2010 (10) TMI 216 - AT - Service Tax

Waiver of pre-deposit U/s 35F - Cenvat credit - The Apex Court s ruling in the case of Maruti Suzuki (P.) Ltd. (2009 -TMI - 34348 - SUPREME COURT), which was in relation to the definition of input under Rule 2(k) of the Cenvat Credit Rules, 2004, was applied by a coordinate bench in the case of Kbace Tech (P.) Ltd. (2010 -TMI - 77017 - CESTAT, BANGALORE) in relation to a taxable service - The Bench relied on Maruti Suzuki (P.) Ltd. to hold that any service mentioned in the inclusive part of the definition of input service should satisfy the legal requirements embodied in the main part of the definition - It also took the view that Cenvat credit on any taxable service would not be allowed by mere reason of the fact that the cost of the service was included in the assessable value of the final product of the manufacturer who claimed the Cenvat credit - - Therefore, the appellant cannot claim Cenvat credit on maintenance and repairs service on the ground that the cost of the service was included in the assessable value of the pumps. Demand of duty - The show-cause notice was issued beyond the normal period of limitation by alleging that the appellant suppressed the factum of availment of Cenvat credit on maintenance and repairs service with intent to evade payment of duty on final product - The defence of the appellant vis-a-vis the invocation of the extended period of limitation is that the factum of availment of Cenvat credit on all input services was clearly disclosed in the periodical returns filed by the appellant - The learned Counsel has, however, fairly conceded that the factum of availment of Cenvat credit on maintenance and repairs service was not specifically mentioned in the returns - Therefore, the demand of duty is not time-barred. The learned counsel has also pointed out that the quantification of duty is incorrect - He submits that the Commissioner has demanded duty equivalent to Cenvat credit availed on numerous services and that approximately 56 per cent of the amount only will take care of maintenance and repairs service - In the memo of appeal, the appellant has quantified this amount (Rs. 61 ,56,300) being 56 per cent of Rs. 1,09,93,392 - For the present purpose, direct the appellant to pre-deposit Rs. 61,56,300 under section 35F of the Central Excise Act - It is ordered, accordingly - The amount shall be deposited within a period of four weeks.

Summary

Issues:
1. Waiver of pre-deposit and stay of recovery sought by the appellant in relation to duty and penalty demanded by the Commissioner.
2. Admissibility of Cenvat credits on maintenance and repair services for fuel dispensing pumps.
3. Interpretation of the definition of 'input service' under the Cenvat Credit Rules, 2004.
4. Allegation of suppression of facts by the appellant.
5. Applicability of case laws and legal precedents in determining eligibility for Cenvat credit.
6. Limitation period for issuing the demand of duty.
7. Quantification of duty demanded by the Commissioner.

Analysis:

1. The appellant sought waiver of pre-deposit and stay of recovery regarding duty and penalty demanded by the Commissioner based on the denial of Cenvat credits. The demand was made for the period from August 2005 to November 2006, invoking the extended period of limitation due to alleged suppression of material facts by the appellant.

2. The Cenvat credits denied were related to maintenance and repair services for fuel dispensing pumps, availed by the appellant after the sale of goods to Oil Marketing Companies. The appellant argued that these services were integral to the manufacture and sale of pumps, meeting the definition of 'input service' under the Cenvat Credit Rules, 2004.

3. The appellant contended that the maintenance and repair services qualified as 'input services' based on various legal precedents and the inclusion of service costs in the assessable value of the pumps. The appellant disputed the allegation of suppression of facts, stating that the interpretation of the 'input service' definition was the basis for availing the credits.

4. The Commissioner argued that the maintenance and repair services must be connected to the manufacturing process to be eligible for Cenvat credit. Legal references were made to support the position that mere inclusion of service costs in the final product's value does not automatically allow for credit on the service tax paid.

5. The Tribunal analyzed the arguments and legal precedents cited by both parties. It referenced the Supreme Court's decision in Maruti Suzuki Ltd. case and other Tribunal decisions to establish that an integral connection between the service and manufacturing process is crucial for claiming Cenvat credit. The appellant failed to prove such a connection, leading to the denial of credit.

6. Regarding the limitation period for demanding duty, the Tribunal found that the appellant did not disclose the specific availing of Cenvat credit on maintenance and repair services in their returns. Hence, the demand was deemed not time-barred.

7. The Tribunal directed the appellant to pre-deposit a specific amount towards the duty demanded, considering the quantification issue raised by the appellant. The order was made with a compliance deadline, taking note of the absence of financial hardship plea by the appellant.