2013 (11) TMI 326 - AT - Central Excise

Eligibility of Cenvat credit Input Service Distributor Waiver of Pre-deposit - Revenue was of the view that the Cenvat Credit on input services could be passed on by an Input Service Distributor only after availing the registration and not before that as it has been made mandatory for a Registration under the Service Tax (Registration of Special Category of Persons) Rules, 2005 before distribution of the credit Held that - Prima facie the Applicant (Mining Division) is required to get themselves registered and distribute the credit thereafter - The claim of the applicant that even though the Service Tax was paid and the services received by their mining division prior to the date of registration as Input Service Distributor the said credit could be distributed in favour of units as they were eligible to the said credit on the ground that the services were used in or in relation to the manufacture of their finished goods a plea would be examined at the time of disposal of the Appeal. Prima facie the procedure laid down for obtaining registration and then passing the credit as input Service Distributor cannot be overlooked and has to be adhered to - the question of eligibility or otherwise to such credit comes later and could be examined at the time of hearing - The Applicant s to deposit Rupees Fifty Lakhs as pre-deposit upon such submission rest of the duty to be waived till the disposal Partial stay granted.

Summary

Issues:
1. Waiver of pre-deposit of Cenvat Credit and penalties.
2. Eligibility of Cenvat Credit distributed by the mining division.
3. Interpretation of rules regarding registration of Input Service Distributor.
4. Adherence to registration procedures for passing on Cenvat Credit.
5. Consideration of financial loss and jeopardy of mining lease in decision-making.

Analysis:
1. The appellant filed applications seeking waiver of pre-deposit of Cenvat Credit and penalties totaling Rs.4.93 Crores and Rs.1.26 Crores in two separate appeals. The issue primarily revolved around the eligibility of Cenvat Credit distributed by the appellant's mining division, registered as an 'Input Service Distributor.'

2. The appellant's mining division registered as an 'Input Service Distributor' and distributed credit to its units. The demand was raised for the recovery of Cenvat Credit distributed by the mining division for services received before registration. The appellant argued that there was no time limit specified for availing and distributing credit by the Input Service distributor, citing relevant judgments to support their claim.

3. The Revenue contended that registration of the mining division was required within a specific timeframe as per the Service Tax rules, and since the registration was done after receiving services, the credit for services received earlier was not admissible. Reference was made to a Supreme Court judgment emphasizing the need to adhere to the provisions in their entirety.

4. The Tribunal noted that the mining division registered as an 'Input Service Distributor' in March 2009 and distributed credit for services received earlier. While the Revenue argued that credit could only be passed on after registration, the Tribunal found that the registration procedure must be followed before distributing credit. The question of eligibility for credit would be examined during the hearing, and the appellant was directed to deposit a specified amount within a set timeframe.

5. Considering the appellant's claimed financial loss and jeopardy to their mining lease, the Tribunal balanced the interests of both parties and directed the appellant to make a deposit. Upon compliance, the balance dues would be waived, and recovery stayed during the appeal process, aligning with principles of law and the interests of the Revenue.

This detailed analysis of the judgment addresses the issues raised in the appeal, providing a comprehensive understanding of the legal reasoning and decision-making process involved.