2013 (11) TMI 916 - AT - Service Tax

CENVAT Credit - Waiver of pre deposit - Outdoor and catering services - Held that - Applicant had rendered Outdoor Catering Services and Business Auxiliary Services to M/s Tata Cummins. Prima facie, I find that the Applicant had availed the CENVAT Credit of the Service Tax paid on the input services rendered by M/s. Pankaj Industries, which related to service of marketing of the projects in Tata Steel, Jamshedpur. I agree with the contention of the ld. AR for the Revenue that prima facie, there is no nexus between the services rendered by M/s. Pankaj Industries to M/s. Tata Steel Ltd. and the output services, i.e.Outdoor Catering Services provided by the Applicant to M/s. Tata Cummins Ltd. - Prima facie case not in favour of assessee - Stay granted partly.

Summary

Issues: Application for waiver of predeposit of CENVAT Credit and penalties under Sections 77 and 78 of the Finance Act, 1994.

Analysis:
- The Appellant, engaged in Business Auxiliary Services and Outdoor Catering Services, sought waiver of predeposit of CENVAT Credit and penalties imposed under Sections 77 and 78 of the Finance Act, 1994.
- The Appellant availed CENVAT Credit on service tax paid by M/s. Pankaj Industries, claiming eligibility under Rule 3(4) of the CENVAT Credit Rules, 2004, despite the services relating to marketing by M/s. Pankaj Industries not directly correlating to the output services provided by the Appellant.
- The Revenue argued that for CENVAT Credit eligibility, services rendered by the Appellant must qualify as input services under Rule 2(l) of the CENVAT Credit Rules, 2004. They contended that the services by M/s. Pankaj Industries were unrelated to the output services of the Appellant.
- After hearing both parties and reviewing the records, the Judge found that the Appellant had availed CENVAT Credit on services provided by M/s. Pankaj Industries, which were for marketing projects unrelated to the output services of the Appellant.
- The Judge agreed with the Revenue's argument that there was no nexus between the services provided by M/s. Pankaj Industries and the output services of the Appellant. Consequently, the Judge directed the Appellant to deposit 25% of the Service Tax involved within 8 weeks, with the balance dues waived upon compliance, and recovery stayed during the Appeal's pendency.

This judgment highlights the importance of establishing a clear nexus between input services and output services for CENVAT Credit eligibility, emphasizing the need for a direct correlation as per the CENVAT Credit Rules. The decision underscores the significance of ensuring that the services for which credit is claimed directly contribute to or are utilized in the provision of the output services, preventing misuse or misinterpretation of credit provisions.