2013 (9) TMI 739 - HC - Service Tax

Waiver of pre deposit - Input credit - Installation of Oxygen plants - Held that - revenue wants to deny credit on the ground that oxygen plant is an immovable property. However, this issue is not discussed at all in the impugned order of Tribunal - Therefore impugned order is set aside and application for dispensing with pre deposit of service tax and penalty is restored for hearing before the Tribunal - Decided in favour of assessee.

Summary

Issues:
1. Challenge to the order requiring predeposit of service tax demand.
2. Interpretation of agreements for lease of Oxygen plants and maintenance services.
3. Eligibility of input tax credit for services used in plant installation.
4. Utilization of credit for payment of service tax on maintenance and repair services.
5. Applicability of credit under different agreements.
6. Consideration of Oxygen plant as immovable property for tax credit purposes.

Analysis:

1. The appeal challenged the Central Excise Customs Service Tax Appellate Tribunal's order requiring the appellant to predeposit 25% of the service tax demand of Rs.1.61 crores for the period June 2006 to March 2007. The demand arose due to incorrect availment of input credit of service tax for installation of Oxygen plants and utilization of the credit for payment of service tax on maintenance and repair services.

2. The appellant entered into agreements with Ispat Industries Limited for lease of Oxygen plants and operation and maintenance services. The ownership of the Oxygen plant remained with the appellant during the lease period, as per the lease agreement terms.

3. The appellant utilized services of various input service providers during plant setup, taking tax credit which was used for discharging service tax on maintenance and repair services. The department contended that the setting up of the plant resulted in immovable property, thus disallowing the credit of input service tax for construction services.

4. The Tribunal held that the appellant could not use the credit of service tax paid for installation services to pay for maintenance and repair services under different agreements. The order directed the appellant to predeposit 25% of the demand, emphasizing the distinction between the agreements but did not discuss the immovable property issue further.

5. The High Court set aside the Tribunal's order, restoring the application for dispensing with the predeposit for further hearing. The parties were directed to appear before the Tribunal for expeditious processing of the stay application within six weeks, with an ad interim stay on recovery of service tax, interest, and penalty until the stay application's disposal.

6. The Court disposed of the appeal without costs, providing a clear timeline for further proceedings and maintaining the stay on recovery of service tax, interest, and penalty until the Tribunal's decision on the matter.