2014 (2) TMI 198 - AT - Service Tax

Waiver of pre-deposit of tax - Denial of CENVAT Credit - Held that - CENVAT credit was denied to the applicants who are engaged in the manufacture of finished leather. They received the services of various foreign commission agents for marketing purposes and paid tax and also availed credit. The demand of Rs.4.48 lakhs was raised denying CENVAT credit under Rule 5 of Taxation of Services (provided from outside India and received in India) Rules 2006 - applicant is not entitled to avail credit on the tax paid on service rendered by their foreign commission agents - Prima facie it appears that they have not produced the documents in respect of denial of credit of Rs.1.20 lakhs - Conditional stay granted.

Summary

Issues:
1. Application for waiver of pre-deposit of tax, interest, and penalty.
2. Denial of CENVAT credit to the applicants.
3. Challenge to the vires of Rule 5 before the Hon'ble Madras High Court.
4. Failure to produce proof of payment of tax.
5. Direction for deposit and waiver of balance amount during the appeal.

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Analysis:

1. The applicant filed applications seeking waiver of pre-deposit of tax amounting to Rs.5,69,133 along with interest and penalty.

2. The denial of CENVAT credit to the applicants, engaged in manufacturing finished leather, was based on the services provided by foreign commission agents for marketing purposes. A demand of Rs.4.48 lakhs was raised, challenging the availing of CENVAT credit under Rule 5 of Taxation of Services Rules, 2006. The learned counsel acknowledged the challenge to the vires of the rule before the Hon'ble Madras High Court, emphasizing that no order had been passed. The learned AR argued that as per Rule 5, the applicants were liable to pay the tax. Additionally, an amount of Rs.1.20 lakhs was related to the short-payment of tax and failure to provide proof of payment.

3. The Tribunal noted that based on a plain reading of the rules, the applicant was not entitled to avail credit on tax paid for services by foreign commission agents. Although the vires of the rule had been contested before the Hon'ble Madras High Court without a final order, the applicants failed to produce documents regarding the denial of credit amounting to Rs.1.20 lakhs. Consequently, the Tribunal directed the applicant to deposit Rs.1,50,000 within four weeks and report compliance by a specified date. Upon this deposit, the pre-deposit of the remaining tax, interest, and penalty would be waived, and recovery thereof stayed during the pendency of the appeal.

4. The judgment was dictated and pronounced in an open court setting.

This detailed analysis covers the issues raised in the judgment, the arguments presented by both sides, and the Tribunal's decision regarding the waiver of pre-deposit and the denial of CENVAT credit to the applicants.