2013 (3) TMI 132 - AT - Service Tax

CENVAT credit on capital goods denied - interest and equivalent amount of penalty u/s 78 of the Finance Act, 1994 read with CENVAT credit Rules, 2004 levied - assessee contested against demand as barred by limitation - Held that - As the appellant did not intimate regarding the installation of two units therefore CENVAT credit on capital goods on these two units prima facie is not available to the applicant. Under these circumstances the applicants have failed to make out a case for 100% waiver of pre-deposit, thus directed to make pre-deposit of 50% of the impugned demand on account of denial of CENVAT credit within 12 weeks and report compliance on 18.02.2013.

Summary

Issues:
Waiver of pre-deposit of service tax due to denial of CENVAT credit on capital goods used by the applicant during 2006-07 and 2007-08.

Analysis:
The case involves the appellant seeking a waiver of pre-deposit of service tax amounting to Rs. 1,04,69,725 due to the denial of CENVAT credit on capital goods used during the period of 2006-07 and 2007-08. The appellant, engaged in coal washing activities, had seven units but had only informed the department about five units. The failure to inform about the remaining two units led to the denial of CENVAT credit on capital goods used by those units. Consequently, a demand was raised, including interest and penalty under relevant laws. The appellant argued that the show-cause notice issued in 2011 was time-barred as they had disclosed the CENVAT credit in their service tax returns. They also claimed a procedural lapse and rectification of the error. However, the tribunal observed that since the appellant did not inform about the two units in question, the CENVAT credit on capital goods for those units was not prima facie available. Therefore, the tribunal held that the appellant failed to establish grounds for a 100% waiver of pre-deposit and directed them to pay 50% of the demand within 12 weeks, with the remaining amount stayed during the appeal process.

This judgment highlights the importance of timely disclosure and communication with tax authorities regarding all units and activities to avoid the denial of CENVAT credit. It also emphasizes the significance of compliance with procedural requirements to prevent adverse consequences. The tribunal's decision to grant a partial waiver of pre-deposit underscores the need for appellants to provide sufficient justification and evidence to support their claims for relief in tax matters. The ruling serves as a reminder for taxpayers to adhere to statutory provisions and maintain accurate records to mitigate potential liabilities and penalties in tax disputes.