2014 (1) TMI 1607 - AT - Service Tax

Waiver of pre-deposit of the service tax - Reversal of CENVAT Credit availed - applicant are now providing renting of immovable property service, management and maintenance or repair service, availed the credit of tax paid in respect of services used for construction of Mall - Held that - in respect of the service, commercial or industrial construction service the service tax has been paid by availing the benefit of notification which provides exemption up to 66% on the ground that credit in respect of the duty paid on inputs and capital goods is not availed. In view of this fact, we find that applicant is not entitled to take credit in respect of inputs and capital goods. The applicant had already reversed the credit on the inputs used in the construction of the mall. The applicant had also pleaded financial hardship on the ground that the applicant are under loses as the commercial shops which are constructed are not fully rented out - Following decision of Galaxy Mercantiles Ltd. Vs. Commissioner of Central Excise, Noida 2013 (10) TMI 820 - CESTAT NEW DELHI - LB - Conditional stay granted.

Summary

Issues:
Waiver of pre-deposit of service tax amount, eligibility of credit availed on construction materials, applicability of exemption notification, financial hardship plea.

Analysis:
The appellant sought waiver of pre-deposit of a substantial service tax amount along with interest and penalty. The case revolved around the appellant's construction of a shopping mall and their claim for credit on service tax paid for various materials used in the construction. The Revenue contended that the shopping mall, being an immovable property, was not liable to central excise duty or service tax as an output service, thus challenging the appellant's entitlement to credit for inputs, capital goods, and services used in the construction.

The appellant relied on a previous decision in Nirlon Ltd. to support their plea for waiver of pre-deposit. On the other hand, the Revenue cited a stay order in the case of Galaxy Mercantiles Ltd. to argue that the appellant should deposit 35% of the credit availed on capital goods, similar to the directive given to another party in a comparable situation. The Revenue emphasized that the contractor providing the taxable service had paid service tax by availing an exemption notification, making the credit on inputs and capital goods unavailable to the appellant.

The Tribunal noted that the service tax for the construction service had been paid by the contractor under an exemption notification, which led to the conclusion that the appellant was not entitled to credit for inputs and capital goods. The appellant had already reversed the credit on inputs used in the construction due to financial hardship arising from incomplete rental of commercial shops within the mall. Consequently, the Tribunal directed the appellant to deposit 35% of the credit availed on capital goods, amounting to Rs.79 lakhs, in addition to the already deposited sum, within eight weeks. Upon this deposit, the pre-deposit of the remaining dues was waived, and the recovery was stayed pending the appeal.

In conclusion, the Tribunal's decision was based on the specific circumstances of the case, including the financial hardship claimed by the appellant and the precedent set by the Galaxy Mercantiles Ltd. case. The judgment balanced the interests of both parties by requiring a partial deposit while granting a waiver for the remaining dues, ensuring fair treatment in light of the complex tax and credit issues involved in the construction of the shopping mall.