2014 (2) TMI 383 - AT - Service Tax

Waiver of pre-deposit - Stay of recovery - Demand of service tax - Adjustment of excess service tax paid earlier - Held that - Since there is no dispute that service tax has been paid, the claim for waiver can be accepted - restriction under Rule 6(3) of the CENVAT Credit Rules does not apply to utilization of CENVAT credit availed on capital goods - during the relevant periods, if we take only credit taken on inputs/input services, the availment would not exceed 20% as required under Rule 6(3) of the CENVAT Credit Rules. The excess availment has arisen only because the Department has taken into account the credit availed on capital goods also - appellant has made out a prima facie case in their favour - Stay granted.

Issues:
1. Adjustment of excess service tax paid without centralized registration.
2. Demand for education cesses on excess CENVAT credit utilization.
3. Demand for CENVAT credit utilization exceeding 20%.
4. Consideration of waiver of pre-deposit and stay against recovery.

Analysis:

1. Adjustment of Excess Service Tax:
The impugned Order-In-Original addressed two show-cause notices issued to the appellant. The first notice demanded service tax and education cesses for the period of October 2006 to March 2007 due to the appellant's adjustment of excess service tax paid earlier without having centralized registration. The appellant argued that the excess payment was adjusted after obtaining centralized registration in May 2007, attributing the demand to a procedural error. The Tribunal noted that the issue of demanding service tax required a detailed examination of procedures and legal provisions. As there was no dispute regarding the payment of service tax, the claim for waiver was accepted.

2. Demand for Education Cesses on Excess CENVAT Credit Utilization:
The second show-cause notice pertained to demanding CENVAT credit and education cesses for the period of April 2007 to March 2008. The demand was based on the appellant's alleged utilization of more than 20% of CENVAT credit for tax payments. The appellant relied on a previous Tribunal decision to support their case. The Tribunal analyzed the issue and found that the restriction on credit utilization did not apply to capital goods. It was observed that the excess utilization arose from including credit on capital goods, which was not restricted by Rule 6(3) of the CENVAT Credit Rules. Consequently, the Tribunal concluded that the appellant had a prima facie case in their favor regarding the excess CENVAT credit utilization.

3. Demand for CENVAT Credit Utilization Exceeding 20%:
The Tribunal's analysis revealed that the restriction on CENVAT credit utilization exceeding 20% under Rule 6(3) did not apply to credit availed on capital goods. By considering only credit on inputs/input services, the appellant's utilization did not surpass the 20% limit. The excess utilization was attributed to including credit on capital goods, which was permissible. Therefore, the Tribunal found in favor of the appellant on this issue.

4. Consideration of Waiver of Pre-Deposit and Stay Against Recovery:
Ultimately, the Tribunal allowed the request for waiver of pre-deposit and stay against recovery during the pendency of the appeals. This decision was made after considering the arguments presented and the legal provisions applicable to the case.

This comprehensive analysis of the judgment highlights the key issues addressed by the Appellate Tribunal CESTAT BANGALORE and the detailed reasoning behind each decision made in the case.

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