2013 (8) TMI 256 - AT - Service Tax

CENVAT credit - whether the assessee had wrongly taken and distributed cenvet credit earned on input services actually received and consumed in its two units which are engaged in providing scientific and consultancy service to its other units engaged in manufacturing dutiable and excisable goods assessee was registered for payment of service tax under reverse charge under Section 66 A in respect of the services - Consulting Engineers , Scientific Consultancy Service and Business Auxiliary Service - Held that - Rule 3(1) allows a manufacturer of a final product to take credit of excise duty and service tax among others paid on any input or capital goods received in the factory of manufacturer of final products for any input service the only stipulation was that it should be received by the manufacturer of the final product it must be read with the broad and comprehensive meaning of the expression input service in Rule 2(1) - Court relied upon Deepak Fertilizers and Petrochemicals Corporation Ltd. v. C.C.E., Belapur (2013 (4) TMI 44 - BOMBAY HIGH COURT). Bar of limitation - assessee pleaded that order is unsustainable - as manufacturing units during the course of audit during September 2006 and report of the audit was available in February 2007 - the show cause notice issued on 14.10.2011 is beyond the period of limitation. Waiver of pre- deposit court granted full waiver of pre deposit and granted the stay application decided in favour of assessee.

Summary

Issues:
1. Waiver of pre-deposit sought by the appellant.
2. Admissibility of cenvat credit earned on input services.
3. Allegations of wrongful utilization of cenvat credit.
4. Applicability of Rule 3 read with Rule 2(m), Rule 7(b), and Rule 9 of the Cenvat Credit Rules, 2004.
5. Challenge based on the period of limitation.
6. Comparison with the decision of the Bombay High Court in a similar case.

Analysis:
1. The appellant, a company registered under the Company Act, 1956, sought waiver of pre-deposit following an adjudication order dated 3.9.2012. The appellant, an input service distributor registered for service tax under reverse charge, faced allegations of wrongly utilizing cenvat credit, prompting proceedings against them.

2. The core issue revolved around the admissibility of cenvat credit earned on input services. The appellant contended that the credit could be legitimately distributed to its manufacturing units, arguing that their R & D units, though not producing final products, served different manufacturing locations. This argument was supported by referencing a similar case before the Bombay High Court.

3. The allegations against the appellant pertained to the wrongful utilization of cenvat credit, specifically in contravention of Rule 3 read with Rule 2(m), Rule 7(b), and Rule 9 of the Cenvat Credit Rules, 2004. The adjudication order demanded recovery of the credited amount along with penalties and interest.

4. The appellant challenged the adjudication order on the grounds of the period of limitation, asserting that the show cause notice issued was beyond the prescribed time limit. This challenge was crucial in determining the validity of the proceedings against the appellant.

5. Drawing parallels with the decision of the Bombay High Court in a similar case, the Tribunal found merit in the appellant's arguments. Citing the High Court's ruling, the Tribunal granted full waiver of pre-deposit and stayed further proceedings pending the appeal's disposal, emphasizing the strength of the appellant's prima facie case.

Overall, the judgment highlighted the complexities of cenvat credit utilization, the importance of adherence to procedural timelines, and the significance of legal precedents in shaping decisions related to tax matters.