2011 (5) TMI 440 - AT - Service Tax

Eligibility of cenvat credit - not produced proper duty paying documents - scheme of demerger - Appellant s company was availing of credit by virtue of the Hon ble High Court of Delhi and Bombay judgments for demerger of unit - In terms of the said scheme all assets and properties whether movable or immovable benefits available under any rules regulations statutes including direct and indirect taxes and particularly sales tax benefits Cenvat benefit import and export benefit of customs duty of the demerged company in relation to the BPO Division shall become part of the resulting company without any act or deed on the part of the demerged company - find that there is no dispute that the appellant is eligible to avail of Cenvat credit - At this juncture find that the appellant has produced proper duty paying documents - The scheme of demerger has been approved by the Hon ble High Court of Delhi and Bombay - Hence the appellant has made out prime facie case for waiver of pre-deposit of the amounts involved

Issues:
1. Waiver of Cenvat credit irregularly availed
2. Interest under Cenvat Credit Rules, 2004
3. Penalty under Cenvat Credit Rules, 2004

Waiver of Cenvat credit irregularly availed:
The appellant sought waiver of an amount of Rs. 2,57,22,325 being Cenvat credit irregularly availed, along with interest and penalty. The adjudicating authority confirmed the demand, citing reasons that the appellant was not eligible for the credit due to lack of proper duty paying documents and alleged non-intimation of demerger of their company. The appellant argued that they availed the credit based on documents available and produced before the authority, emphasizing the eligibility of the credit. The Judicial Member noted the scheme of demerger approved by the High Courts, which stated that assets, benefits, and tax advantages of the demerged company would transfer to the resulting company without further action. It was found that the appellant had produced proper duty paying documents and was eligible for the credit, leading to the allowance of the waiver application and stay on recovery pending appeal disposal.

Interest under Cenvat Credit Rules, 2004:
The interest under Rule 14 of Cenvat Credit Rules, 2004, read with Section 75 of the Finance Act, 1994, was also subject to the waiver application. The appellant's eligibility for Cenvat credit was a crucial factor in determining the waiver of interest. The Judicial Member's decision to allow the waiver of pre-deposit of the amounts involved extended to the interest component as well, signifying a favorable outcome for the appellant in this regard.

Penalty under Cenvat Credit Rules, 2004:
Regarding the penalty of Rs. 2,58,00,000 under Rule 15(4) of the Cenvat Credit Rules, 2004, read with Section 78 of the Act, the appellant's case for waiver was closely tied to the eligibility for Cenvat credit. The adjudicating authority's findings and the appellant's submissions regarding duty paying documents and demerger played a significant role in the decision-making process. Ultimately, the Judicial Member's analysis of the demerger scheme approved by the High Courts and the appellant's compliance with producing necessary documents led to the allowance of the waiver application, including the penalty amount, with a stay on recovery pending appeal resolution.

This comprehensive analysis of the judgment from the Appellate Tribunal CESTAT, Bangalore, highlighted the key issues of waiver of Cenvat credit irregularly availed, interest under the Cenvat Credit Rules, 2004, and penalty under the same rules. The decision to grant the waiver and stay on recovery was based on the appellant's eligibility for the credit, supported by proper documentation and the approved demerger scheme by the High Courts, emphasizing compliance with legal requirements and procedural fairness in the adjudication process.

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