2013 (6) TMI 538 - AT - Service Tax

Cenvat Credit - Input services - repair and maintenance of the oxygen plant - Held that - in case the installation and commissioning of the plant was done by a different party, then the assessee who undertakes the operation and maintenance and activity cannot take credit inrespect of service tax in respect of installation and commissioning of the plant. In the present case, different activities are undertaken by the applicants under a different agreements and the dispute is in respect of the credit which was availed in respect of installation and commissioning of the plant under a different contract and the applicants want to utilize that credit towards payment of service tax in respect of operation and maintenance service which is under a different contract. - prima case is against the assessee - credit denied.

Summary

Issues:
1. Waiver of pre-deposit of service tax, interest, and penalties.
2. Entitlement to credit of service tax paid on taxable services for installation and commissioning of plant.
3. Integration of installation, operation, and maintenance activities.
4. Dispute regarding credit availed under different agreements.

Analysis:

1. The applicants sought a waiver of pre-deposit of service tax, interest, and penalties amounting to Rs. 1,61,94,252. The demand arose from the denial of credit of service tax availed before entering into a contract for maintenance and repair services.

2. The dispute centered around the applicants' entitlement to credit for service tax paid on taxable services used in the installation and commissioning of the oxygen plant. Revenue contended that credit should be denied as the plant was considered immovable property, thus not eligible for credit.

3. The applicants argued that installation, operation, and maintenance activities were integrated, making them eligible for the credit. They maintained that since operation and maintenance follow installation, the activities should be viewed as a single, continuous process.

4. The Tribunal noted that the applicants had separate agreements with the client for installation, commissioning, and operation/maintenance of the plant. The dispute arose from the credit availed for installation and commissioning under a different contract, which the applicants sought to use for service tax payment related to operation and maintenance under a separate agreement.

5. The Tribunal found that if installation and commissioning were performed by a different party, the party responsible for operation and maintenance could not claim credit for the service tax related to installation. As different activities were carried out under distinct agreements, the Tribunal ruled that the applicants had not sufficiently demonstrated a case for a total waiver of service tax.

6. Consequently, the Tribunal directed the applicants to deposit 25% of the service tax demand within 8 weeks. Upon this deposit, the pre-deposit of the remaining amount was waived, and recovery was stayed during the appeal's pendency. Compliance was required to be reported by a specified date.

In conclusion, the judgment addressed the intricacies of credit entitlement for service tax in the context of distinct agreements governing installation, commissioning, and operation/maintenance activities. The Tribunal's decision balanced the parties' arguments and directed a partial deposit while staying recovery pending the appeal process.