2013 (11) TMI 1309 - AT - Service Tax

Service tax liability - Banking and other Financial services - Renting of immovable property service - Denial of CENVAT Credit on the input services - NOTIFICATION NO.29/2004-ST, DATED 22.9.2004 - Held that - prima facie exemption on the amount of interest is limited to (a) over-draft facility and (b) cash credit facility. At this juncture, we are not able to appreciate the argument of the Ld. Chartered Accountant that the interest earned on discounting of bills, bills of exchanges or cheques are also included in the purview of the said exemption Notification. Regarding the wrong availment of CENVAT Credit on input services that had been utilized in providing exempted services, in our opinion, are not eligible to the CENVAT Credit in view of the specific provision contained in Rule 6(1) of CENVAT Credit Rules. If the Applicant could not able to maintain separate account of the input services that were used in providing taxable services and exempted services, then consequences, are accordingly, mentioned under subsequent sub-rules. We do not find prima facie any apparent error in the computation of CENVAT Credit demand arrived in Annexure (C) to the show cause notice which has been calculated as per the formula prescribed under sub-rule 3A of Rule 6 of CENVAT Credit Rules, 2004 - Hence, the demand is not entirely barred by limitation. Besides, the issue of limitation is a mixed question of facts and law and would be examined at the time of disposal of the Appeal after appreciating the evidences on record. No financial hardship is pleaded - Applicant could not able to make out a prima facie case for total waiver of pre-deposit of dues adjudged - Partial stay granted.

Summary

Issues:
Application seeking waiver of pre-deposit of Service Tax and CENVAT Credit; Interpretation of Notification No.29/2004-ST dated 22.09.2004; Eligibility for exemption on interest component; Denial of CENVAT Credit on input services; Computation of demand; Barred by limitation; Financial hardship plea.

Analysis:
The judgment revolves around an application seeking waiver of pre-deposit of Service Tax and CENVAT Credit along with an equal penalty imposed under Section 78 of the Finance Act, 1994. The Applicant, engaged in providing taxable services, received a demand notice for non-payment of Service Tax on interest on bill discounting and renting of immovable property services, as well as disallowance of CENVAT Credit on input services used in providing exempted services. The Applicant claimed eligibility for exemption under Notification No.29/2004-ST dated 22.09.2004, arguing that the intention of the legislature was not to levy Service Tax on the interest component but only on the service charge component. They also disputed the denial of CENVAT Credit, contending that Rule 6 is not applicable in their case. The issue of limitation was raised, supported by the submission of ST-3 returns disclosing the benefit of the Notification only from 2008 onwards.

The Ld. Special Counsel for the Revenue argued that the exemption under Notification No.29/2004-ST was limited to overdraft and cash credit facilities, not extending to discounting of bills. He emphasized the burden on the assessee to fulfill all conditions of an exemption Notification, citing relevant case law. The denial of CENVAT Credit on input services used in providing exempted services was justified under Rule 6 of the CENVAT Credit Rules, 2004. The judgment analyzed the text of the Notification and agreed with the Revenue's interpretation, stating that the exemption on interest was confined to overdraft and cash credit facilities. It further highlighted the ineligibility for CENVAT Credit on input services used in providing exempted services as per Rule 6(1) of the CENVAT Credit Rules, 2004.

Ultimately, the Tribunal found no prima facie case for a total waiver of pre-deposit, directing the Applicant to deposit 50% of the confirmed demand within a specified period. The balance dues would be waived upon compliance, with recovery stayed during the pendency of the Appeal. The judgment emphasized the interest of Revenue and the settled legal principles in disposing of such applications, indicating that failure to comply would lead to dismissal of the Appeal without further notice. The issue of limitation was deemed a mixed question of facts and law to be examined during the Appeal's disposal, considering the evidences on record.