2011 (2) TMI 677 - AT - Central Excise

Waiver of pre-deposit - Cenvat credit - Rule 15 of Cenvat Credit Rules, 2004 - Whether the after sale service is regarded as input service - Held that - since the dealers of the Appellant, as per the Appellant s agreement with them are providing the services in question, to the customers of the Appellant for which the dealers were issuing invoices to the Appellant and it is the Appellant who pay the dealers for free after sale service provided to their customers, it is the Appellant who have to be treated as service recipient - Stay applications stand disposed of

Issues Involved:
1. Waiver of pre-deposit of cenvat credit demands.
2. Eligibility of cenvat credit on service tax paid for after-sale services.
3. Applicability of extended period of limitation.
4. Imposition of penalties under Rule 15 of the Cenvat Credit Rules, 2004.

Detailed Analysis:

1. Waiver of Pre-deposit of Cenvat Credit Demands:
The appellant sought a waiver from the requirement of pre-deposit of cenvat credit demands totaling Rs. 9,51,24,628/- for two distinct periods, along with interest and penalties of equal amounts. The Tribunal considered whether the pre-deposit would cause undue hardship to the appellant and whether the appellant had a prima facie case. The Tribunal noted that the appellant had already deposited Rs. 1 crore and found this sufficient for the hearing of the appeals. Hence, the pre-deposit of the remaining amount was waived, and recovery was stayed until the disposal of the appeals.

2. Eligibility of Cenvat Credit on Service Tax Paid for After-sale Services:
The appellant argued that free after-sale repair and maintenance services provided during the warranty period were activities related to their business and thus covered under the definition of 'input service' in Rule 2(l) of the Cenvat Credit Rules, 2004. The Tribunal examined the inclusive part of the definition, which includes "activities relating to business" and noted precedents where after-sale services were considered as activities relevant to business and covered by the definition of 'input service'. The Tribunal found merit in the appellant's plea, agreeing that the services provided by the dealers to the customers under the appellant's agreements were integral to their business and thus eligible for cenvat credit.

3. Applicability of Extended Period of Limitation:
The appellant contended that there was no suppression of facts, and hence the extended period of limitation of five years was not applicable. The Department, however, argued that the appellant had not disclosed the availing of credit of service tax paid by their dealers, which came to light only during an audit. The Tribunal noted that the show cause notices did not raise the issue of whether the appellant could be treated as the recipient of the services, and thus, this point could not be considered at the appellate stage. The Tribunal did not make a definitive ruling on the limitation issue but focused on the prima facie case for waiver of pre-deposit.

4. Imposition of Penalties under Rule 15 of the Cenvat Credit Rules, 2004:
The appellant argued against the imposition of penalties, stating there was no willful misstatement or suppression of facts. The Department maintained that the extended period of limitation and penalties were justified due to the appellant's non-disclosure. The Tribunal, considering the prima facie case and the existing deposit of Rs. 1 crore, waived the pre-deposit of penalties for the hearing of the appeals.

Conclusion:
The Tribunal granted the waiver of the pre-deposit of the remaining cenvat credit demand, interest, and penalties, finding that the appellant had a strong prima facie case and that the existing deposit of Rs. 1 crore was sufficient for the hearing of the appeals. The recovery of the remaining amounts was stayed until the disposal of the appeals. The Tribunal emphasized the inclusive definition of 'input service' and the relevance of after-sale services to the appellant's business, aligning with previous judicial interpretations.

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