2011 (4) TMI 554 - AT - Service Tax

Application for stay - Circular No. 98/1/2008-S.T., dated 4-1-2008 - Plain reading of the definition of the input service under clause (b) thereof discloses that the same includes services used in relation to the setting up, modernization, renovation or repairs of a factory and in the case in hand since the credit is sought to be availed in relation to service tax paid for the services used in relation to modernization of the factory premises, prima facie, we find that the appellants are justified in claiming the credit in respect thereof - prima facie case having been made out for grant of stay while waiving the entire amount demanded under the impugned order - Decided in favor of the assessee

Summary

Issues:
1. Denial of cenvat credit for service tax paid by contractor for construction of factory building.

Analysis:
The judgment revolves around the denial of cenvat credit amounting to Rs. 13,09,196/-, which was sought to be availed by the appellants in relation to the service tax paid by a contractor for the construction of their factory building. The Advocate for the appellants argued that the authorities erred in disallowing the credit by misinterpreting the definition of "input service." The Advocate referred to an unreported order of the Tribunal in a similar matter and contended that the credit should be allowed. On the other hand, the DR for the respondent cited a Board's Circular to support the denial of credit, stating that since the final product was an immovable property, the appellants were not entitled to the credit.

The Tribunal analyzed the definition of "input service" under clause (b), which includes services used in setting up, modernization, renovation, or repairs of a factory. The Tribunal found that the credit was sought for services used in modernizing the factory premises, indicating a justifiable claim by the appellants. The Tribunal differentiated the Board's Circular, stating that it pertained to a different scenario involving commercial or industrial construction services for immovable property, not directly related to the modernization of a factory producing non-excisable products.

The Tribunal supported its decision by referencing a previous stay application in the case of Maruti Motorcycles (I) Pvt. Ltd., where a similar conclusion was reached. Based on the analysis and interpretation of the relevant provisions, the Tribunal found a prima facie case for granting a stay and waived the entire amount demanded under the impugned order. Consequently, the application for stay was allowed, and the impugned order was stayed, with the demanded amount being waived until the appeal's disposal.