2014 (2) TMI 44 - AT - Service Tax

Denial of Cenvat credit - Assessee used credit for providing output services for repair and maintenance - excise duty paid on natural gas used as input - Held that - appellant is engaged in compression of the natural gas, which is amounting to manufacture and is also not in dispute that part of the compressed natural gas is cleared by them on discharge of excise duty. It is also not in dispute that the appellant is distributing the natural gas received from the GAIL to various customers. In our view, if the appellant does not receive natural gas from GAIL, he could not provide any output service nor could he discharge the excise duty on the compression activity undertaken by him - Appellant has made out a prima facie case for the waiver of pre deposit of the amounts involved - Stay granted.

Summary

Issues involved:
Denial of Cenvat credit on service tax paid for transportation of Natural Gas through pipelines.

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Issue Analysis:

The judgment by the Appellate Tribunal CESTAT AHMEDABAD pertains to a stay petition concerning the denial of Cenvat credit on service tax paid for the transportation of Natural Gas through pipelines by one party to another. The appellant, engaged in compressing natural gas and providing output services, argued that the denial of credit was unjustified. The Tribunal noted that a previous stay order had been granted for the same issue, indicating consistency in their approach. The Tribunal acknowledged that the appellant's activities, including compression of natural gas and distribution to customers, were contingent on receiving gas from the other party. It was observed that the appellant's ability to provide output services and discharge excise duty was directly linked to the receipt of natural gas. The Tribunal found merit in the appellant's argument that reliance on a judgment by the Apex Court, which was referred to the Larger Bench, warranted a waiver of pre-deposit. Consequently, the Tribunal held that the appellant had established a prima facie case for the waiver of pre-deposit of the amounts involved.

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The Tribunal emphasized that there was no reason to deviate from the previous decision taken by the Bench regarding the same issue for the same appellant in an earlier period. Therefore, the Tribunal concluded that the appellant had successfully demonstrated a case for the waiver of pre-deposit of the amounts in question. As a result, the application for the waiver of pre-deposit was allowed, and the recovery of the amounts was stayed pending the disposal of the appeal. Additionally, due to the similarity of the issue in this case and another appeal, the registry was instructed to link both appeals for joint disposal in the future.

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In summary, the judgment addressed the denial of Cenvat credit on service tax paid for the transportation of Natural Gas through pipelines, highlighting the appellant's reliance on a previous stay order and the interconnected nature of their activities with the gas provider. The Tribunal found in favor of the appellant, granting a waiver of pre-deposit and staying the recovery of the amounts involved until the appeal's final disposition.