2011 (2) TMI 763 - AT - Service Tax

Waiver of pre-deposit - Cenvat credit on inputa service - Sale promotion - Prima facie , we find sales promotion is included in the input service as per the provisions of Rule 2 (1) of Cenvat Credit Rules and in view of the decision of the Hon ble High Court in the case of Ultra tech Cement Ltd. (CCE, Nagpur Vs. Ultra tech Cement Ltd. 2010 -TMI - 78525 - CESTAT NEW DELHI , as the credit has been availed in respect of the Service Tax paid on sales promotion, applicant has a strong case, therefore, pre-deposit of Service Tax and penalty is waived

Summary

Issues:
1. Waiver of pre-deposit of duty and penalty in relation to Service Tax paid on sales promotion.
2. Interpretation of 'input service' under Cenvat Credit Rules.
3. Application of precedents in determining eligibility for credit.

Analysis:
The judgment pertains to an application for waiver of pre-deposit of duty and penalty amounting to Rs. 53,06,650/- each, concerning the denial of credit availed on Service Tax paid on sales promotion. The Revenue contended that sales promotion is not related to the manufacture of goods, hence, ineligible for credit, citing the decision in M/s. Maruti Suzuki Ltd. Vs. CCE. On the other hand, the applicant argued that sales promotion falls under 'input service' as defined in Rule 2(1) of Cenvat Credit Rules. The applicant also relied on the Bombay High Court's decision in CCE, Nagpur Vs. Ultra tech Cement Ltd., which differentiated between 'input' and 'input service', emphasizing the inclusion of sales promotion as an 'input service'.

The Tribunal, after considering the arguments, found prima facie that sales promotion is indeed covered under 'input service' as per Rule 2(1) of Cenvat Credit Rules. Referring to the precedent set by the Bombay High Court in Ultra tech Cement Ltd., the Tribunal acknowledged the distinction between 'input' and 'input service'. Given the strong case presented by the applicant and the alignment with legal interpretations, the Tribunal granted the waiver of pre-deposit of Service Tax and penalty. The recovery of the same was stayed pending the appeal, thereby allowing the stay petition.

In conclusion, the judgment highlights the importance of correctly interpreting the provisions of Cenvat Credit Rules, especially regarding the definition of 'input service'. It underscores the significance of legal precedents in determining the eligibility for availing credits, ultimately leading to the favorable decision of waiving the pre-deposit and staying the recovery during the appeal process.