2007 (6) TMI 104 - AT - Service Tax

Cenvat credit of Service tax paid on input service - Post 10-09-04 amendment even if on the basis of documents issued before 10-09-04 credit is available but since assessee is not cooperated part stay is granted

Issues:
1. Challenge to the order of Commissioner confirming demand of wrongly taken Cenvat credit.
2. Interpretation of Cenvat Credit Rules and Service tax Credit Rules.
3. Applicability of circular issued by Central Board of Excise & Customs.
4. Examination of recent amendments in Service tax Credit Rules.
5. Failure to cooperate with authorities in providing necessary details.
6. Direction for depositing a sum of money pending appeal.

Analysis:

1. The appeal challenges the Commissioner's order confirming the demand of Rs. 1,74,64,509/- for wrongly taken Cenvat credit on input services received. The Commissioner also imposed a penalty of Rs. 10,000/- on the appellant. The grounds for rejecting the Cenvat entitlement were based on the misunderstanding regarding the categorization of input and output services, which was vehemently contested by the appellant's counsel. The Commissioner's order did not consider the amendments in the Service tax Credit Rules 2002, leading to the conclusion that the input services did not match the output services.

2. The appellants relied on a circular issued by the Central Board of Excise & Customs, arguing that even if the Modvat credit was not taken by the manufacturer, they are entitled to Cenvat credit if the credit was "earned" by them. They contended that this principle should apply based on the provisions of Rule 57AC(2)(c) despite the circular belonging to an earlier excise era. The appellant had regularly filed returns containing details of the credit availed by them.

3. The department's representative referred to Rule 11(1) of the Cenvat Credit Rules 2004, emphasizing that any unutilized credit earned prior to September 10, 2004, shall be allowed as Cenvat credit. The definitions of "input service" and "output service" under Rule 2 were highlighted to support the argument that unless a service is "rendered," it cannot be considered an "output service."

4. The Tribunal observed that the Commissioner did not consider the recent amendments in the Service tax Credit Rules 2002, leading to an incorrect categorization of input services. The order also noted the appellant's lack of cooperation in providing necessary details such as dates of issue of invoices, bills, and challans to the department, which led to presumptions by the Commissioner. As the appellant failed to make a case for a total waiver of duty and penalty, they were directed to deposit a sum of Rs. 50 lakhs within eight weeks, failing which the appeal would be dismissed.

5. The Tribunal directed the appellant to deposit a sum of Rs. 50 lakhs within eight weeks, failing which the appeal would stand dismissed. Upon depositing the said amount, the remaining duty and penalty confirmed under the impugned order would be waived pending the appeal hearing.

6. The application was disposed of accordingly, with the directions for depositing the specified amount within the given timeframe. The compliance reporting was scheduled for a later date, as mentioned in the judgment.

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