2014 (1) TMI 1417 - AT - Service Tax

Abatement from value of tax to the extent of 60% - Notification No. 9/2004-S.T., dated 9-7-2004 - Cenvat credits on capital goods - Held that - There is need to verify the fact whether during March 2006 appellant was availing Cenvat credit or not because most of the receipts under disputes relate to services rendered during March 2006 and during this months the new condition has been imposed. However the impugned order shows details of Cenvat credit availed from April 2006 only. The whole matter is dealt with on the premise that rate as prevalent on the date of receipt of consideration for service will apply - Stay granted.

Summary

Issues:
1. Interpretation of abatement period for service provided and consideration received.
2. Applicability of Service Tax on consideration received after the abatement period.
3. Availability of Cenvat credit and impact on tax liability.
4. Waiver of pre-deposit during appeal proceedings.

Analysis:

Issue 1: Interpretation of abatement period for service provided and consideration received
The appellant, engaged in rent-a-cab services, was availing tax exemption under Notification No. 9/2004-S.T. till 31-3-2006. The notification was later amended, linking the exemption to non-availment of Cenvat credits. The dispute arose regarding services provided before 1-4-2006 but with consideration received after that date. The appellant argued for abatement based on the service date's tax rate, not the consideration date. The Tribunal prima facie agreed with this stance, emphasizing the need to apply the prevalent rate at the service date.

Issue 2: Applicability of Service Tax on consideration received after the abatement period
The Tribunal highlighted the importance of verifying whether the appellant availed Cenvat credit during March 2006, as the new condition was imposed during that period. The order lacked details on Cenvat credit availed before April 2006, leading to a focus on the consideration date for service tax calculation. The Tribunal granted a waiver of pre-deposit and stayed demand collection, pending further examination of Cenvat credit utilization and its impact on tax liability.

Issue 3: Availability of Cenvat credit and impact on tax liability
The Tribunal directed Revenue to present arguments during the final hearing, emphasizing the need to address the appellant's Cenvat credit utilization during the service period, particularly in March 2006. The Tribunal's decision to grant the waiver and stay was based on the incomplete information regarding Cenvat credit utilization, highlighting the significance of this factor in determining the tax liability for the disputed period.

Issue 4: Waiver of pre-deposit during appeal proceedings
Considering the appellant's averments and the balance of convenience, the Tribunal decided in favor of waiving the pre-deposit during the appeal process. This decision was influenced by the prima facie merit in the appellant's argument regarding the abatement period and the prevailing tax rate at the time of service provision, indicating a fair chance of success in the appeal.

This judgment delves into the nuances of tax exemption, abatement periods, Cenvat credit utilization, and the timing of consideration receipt in determining the Service Tax liability. The Tribunal's detailed analysis underscores the importance of aligning tax rates with service provision dates and thoroughly examining Cenvat credit utilization to ensure a fair and accurate tax assessment.