2013 (11) TMI 1302 - AT - Service Tax

Demand under Rule 6(3) of Cenvat Credit Rules, 2004 - Appellant provided taxable service and exempted service and in spite of that they did not restrict the utilization of credit to 20% of the tax paid on output service as per Rule 6(3), as was in existence prior to 01-04-2008 - Whether services namely giving loans, hire-purchase services etc. are exempted services or not - Held that - activities are taxable services notwithstanding that for deciding the value of service on which tax is to be paid, interest is not included or for the reason the service enjoys partial exemption under Notification No.4/2006-ST, dated 01.03.2006 or on account of provision in Service Tax (Determination of Value) Rules, 2006. - stay granted on this count. Assessee directed to make partial pre deposit in respect of ineligible credit - Partial stay granted.

Summary

Issues involved:
1. Consideration of additional evidence in a stay petition.
2. Interpretation of Rule 6(3) of Cenvat Credit Rules, 2004.
3. Eligibility of Cenvat credit on certain input services.
4. Whether lending is an exempted service for Cenvat credit purposes.
5. Contestation of credit on ineligible input services.

Detailed Analysis:
1. The Tribunal considered two stay petitions along with an application for additional evidence. The application aimed to submit correct accounting codes of input services for which credit had been taken. The Tribunal acknowledged the inability to verify the particulars but accepted the evidence for future verification, disposing of the miscellaneous petition accordingly.

2. The primary issue in the stay petitions was the demands confirmed under Rule 6(3) of Cenvat Credit Rules, 2004. The demands were based on the applicant providing both taxable and exempted services without restricting credit utilization to 20% of the tax paid on output service. The dispute also involved the eligibility of Cenvat credit on various input services, leading to specific amounts demanded in the Show Cause Notices.

3. The applicant's services mainly included lending money and hire purchase services, with additional activities like securitization and servicing loan portfolios. Disputes arose regarding the taxation of interest, penal charges, and other fees related to the services provided. The core dispute revolved around whether lending constituted an exempted service impacting the Cenvat credit eligibility under Rule 6.

4. The Tribunal deliberated on whether lending should be considered an exempted service for Cenvat credit purposes. The applicant argued that since interest on loans was not fully exempted from service tax, it should not be categorized as an exempted service under Rule 2(e) of Cenvat Credit Rules, 2004. Reference was made to a previous tribunal decision supporting this argument.

5. While the applicant contested the issue of credit on ineligible input services, the Revenue representative argued that interest on loans constituted consideration for services provided, making lending an exempted service. However, the Tribunal noted the lack of a clear decision on whether lending should be considered an exempted service in the impugned order, leading to a prima facie view that lending and hire-purchase services should be treated as taxable services.

6. Ultimately, the Tribunal found the impugned order faulty for not addressing the critical issue of whether lending and hire-purchase services were exempted. It ruled that these activities were taxable services, directing the applicant to make a pre-deposit for a specific amount related to ineligible credit while waiving the pre-deposit for the remaining dues during the appeal's pendency.