2012 (9) TMI 137 - AT - Service Tax

Waiver of pre-deposit payment of service tax on provisional basis demand on account of short payment of service tax Held that - None of the two show cause notices, the issue of wrong availment of Cenvat credit has been raised - Commissioner, while adjudicating the same has travelled beyond the scope of show cause notices by disallowing the Cenvat credit for which the appellant had not been put on notice - order is not sustainable - requirement of pre-deposit waived

Summary

Issues:
Provisional assessment of service tax, demand based on billed amount, alleged wrongful Cenvat credit, sustainability of the Commissioner's order, waiver of pre-deposit for hearing the appeal.

Analysis:
The appellant provided telephone connection services to clients during the period of dispute from April 2003 to March 2004. They followed provisional assessment for service tax, paying based on provisional figures of collections against invoices. Despite filing final ST-3 returns showing excess payment of service tax, the Commissioner issued show cause notices demanding Rs. 1,18,69,436/- along with interest. The demand was based on alleged inadmissible Cenvat credit of Rs. 1,27,70,538/-, which the appellant could not utilize for tax payment. The Commissioner confirmed the demand through an order-in-original, leading to the appeal.

During the hearing, the appellant's counsel argued that the demand was solely based on billed amounts, with no mention of wrongly availed Cenvat credit in the show cause notices. They contended that the Commissioner exceeded the scope of the notices by disallowing the credit without prior notice, making the order unsustainable. The appellant also highlighted the absence of a finalization order for the provisional assessments, questioning the validity of the show cause notices issued during the provisional period.

The Departmental Representative opposed the stay application, emphasizing the correctness of the Commissioner's decision to disallow the inadmissible Cenvat credit and uphold the service tax demand. They argued that the payment through Cenvat credit, later found inadmissible, justified the demand and precluded the need for a waiver.

After considering both sides' arguments and reviewing the records, the Tribunal found that the provisional assessments were not finalized, rendering the show cause notices for demand of service tax on billed amounts unnecessary. Moreover, the issue of wrongly availed Cenvat credit was not raised in the notices, making the Commissioner's decision to disallow it unsustainable. As a result, the Tribunal waived the pre-deposit requirement for hearing the appeal and stayed the recovery of the demand until the appeal's disposal, allowing the stay application.