2012 (12) TMI 399 - AT - Service Tax

Waiver of pre-deposit and stay of recovery of amount of Rs.18,931/- and equal amount of penalty imposed - rent for sales offices - held that - Cenvat Credit is claimed in respect of service tax on rent paid for their office at Bangalore whereas their manufacturing unit is in the Raigad Commissionerate which is not an Input Service as defined under Rule 2 (1) of Cenvat Credit Rules, 2004 - pre-deposit of Rs.18,931/- (Rupees eighteen thousand nine hundred and thirty one only) to be paid by the applicants within six weeks and compliance to be reported on 21.9.2012. On due compliance, there shall be stay recovery of interest and penalty till disposal of the appeal.

Summary

Issues:
1. Denial of Cenvat Credit on service tax paid for rent.
2. Determination of whether the service qualifies as an input service under Rule 2(1) of the Cenvat Credit Rules, 2004.

Analysis:
Issue 1: The appellant, M/s Mahindra Ugine Steel Co. Ltd., filed a stay application seeking waiver of pre-deposit and stay of recovery of Rs.18,931/- along with an equal amount of penalty imposed on them. The dispute arose when the department denied the Cenvat Credit of service tax paid on rent for their sales office in Bangalore, contending that this service did not qualify as an input service as per Rule 2(1) of the Cenvat Credit Rules, 2004.

Issue 2: The appellant argued that the services in question were utilized for marketing their products, thereby being related to the manufacturing process of their finished goods. They relied on a Tribunal decision in the case of Bharat Fritz Werner Ltd. vs. Commissioner of Central Excise, Bangalore to support their claim. On the other hand, the Deputy Commissioner (A.R.) contended that since the factory was located in Raigad Commissionerate while the rent was paid for an office in Bangalore, the service could not be considered an input service under Rule 2(1) of the Cenvat Credit Rules.

The Tribunal, after considering the arguments, noted that the Cenvat Credit was claimed for service tax on rent paid for the Bangalore office, even though the manufacturing unit was in a different location. The Tribunal found that the case law cited by the appellant was not directly applicable to the present situation as it pertained to Real Estate Agent Service. Additionally, the Tribunal took into account that the amount in dispute was Rs.18,931/- only. Consequently, the Tribunal ordered the appellant to pre-deposit the said amount within six weeks and report compliance by a specified date. Upon compliance, the recovery of interest and penalty was stayed until the appeal's disposal.