2013 (11) TMI 557 - AT - Service Tax

Cenvat Credit outsourcing of services to sister concern - cenvat credit of service tax paid by the sub-contractor - input services mainly on telephone, rent a cab and chartered accountant services - Held that - The Service tax amount paid by the sister entity was being disallowed by the Department in the present appeal - the invoices issued by the sister entity, in which the amount has been charged in respect of service charges rendered on Audits, Limited Reviews, FDRs and Certification works during the period - The service tax paid by the sister entity on this account has been claimed by the appellants as CENVAT credit - the Board circular No.96/7/2007, dated 23 August 2007, in which it was clarified by the Board that when the services provided by a sub-contractor are used by the main service provider for completion of its work, the service tax paid by the sub-contractor can be taken as credit by the main service provider - Prima facie, the appellants have a strong case for waiver of the deposit - the deposit waived and stay granted against the recovery till the disposal Stay granted.

Issues:
1. Waiver of deposit and stay against recovery of amount.
2. Admissibility of CENVAT credit availed by the appellants.
3. Interpretation of Rules 2, 3, 4, 6, and 9 of the CENVAT Credit Rules.
4. Applicability of Board circular No. 96/7/2007 on service tax credit.

Issue 1: Waiver of deposit and stay against recovery of amount

The Appellate Tribunal considered an Application filed by M/s. A.F. Ferguson Associates seeking waiver of deposit and stay against the recovery of Rs.2,88,193/- along with an equal amount of penalty confirmed by the lower authority. The Department alleged that the appellants wrongly availed CENVAT credit in violation of certain Rules. The Ld. Advocate argued that a significant portion of the amount pertained to chartered accountant services outsourced to their sister entity, M/s. A.F. Ferguson & Co., and the service tax paid by the sister entity was being disallowed. The Tribunal, after reviewing the invoices and considering Board circular No. 96/7/2007, found that the appellants had a strong case for waiver of the deposit. Consequently, the Tribunal waived the deposit and granted a stay against recovery until the appeal's disposal.

Issue 2: Admissibility of CENVAT credit availed by the appellants

The Department alleged that the appellants wrongly availed CENVAT credit of Rs.2,88,192/- in respect of input services, including telephone, rent a cab, and chartered accountant services. The Department claimed that the appellants contravened various Rules of the CENVAT Credit Rules, and the credit availed during the period 2005 was not admissible. The Ld. Advocate argued that a portion of the amount pertained to the opening balance of the CENVAT account register, while the disputed amount related to the three input services, primarily chartered accountant services outsourced to their sister entity. The Tribunal, after examining the invoices and relevant circulars, found that the appellants had a prima facie strong case for waiver of the deposit due to the admissibility of the CENVAT credit.

Issue 3: Interpretation of Rules 2, 3, 4, 6, and 9 of the CENVAT Credit Rules

The Department alleged that the appellants contravened Rules 2, 3, 4, 6, and 9 of the CENVAT Credit Rules by wrongly availing CENVAT credit. The Ld. Advocate argued that the major portion of the disputed amount pertained to chartered accountant services outsourced to their sister entity, and the service tax paid by the sister entity was disallowed. The Tribunal, after considering the arguments and relevant circulars, found that the appellants had a strong case for waiver of the deposit based on the interpretation of the Rules and the admissibility of the CENVAT credit.

Issue 4: Applicability of Board circular No. 96/7/2007 on service tax credit

The Tribunal referenced Board circular No. 96/7/2007, dated 23 August 2007, which clarified that when services provided by a sub-contractor are used by the main service provider for work completion, the service tax paid by the sub-contractor can be claimed as credit by the main service provider. In this case, the Tribunal found that the service tax paid by the sister entity for chartered accountant services, utilized by the appellants, was admissible as CENVAT credit. This interpretation, along with the invoices provided, supported the Tribunal's decision to grant waiver of the deposit and stay against recovery until the appeal's disposal.

This detailed analysis of the judgment highlights the issues of waiver of deposit, admissibility of CENVAT credit, interpretation of relevant Rules, and the applicability of a significant Board circular on service tax credit, providing a comprehensive overview of the Tribunal's decision.

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