2014 (2) TMI 387 - AT - Service Tax

Eligibility to avail cenvat credit - Service tax rendered for laying the pipelines for drawing of water from a source Waiver of Pre-deposit Held that - The services would be eligible for cenvat credit as the water which transported is used in manufacturing pharmaceutical goods - the appellant has already deposited the entire amount of service tax liability, the amount is enough deposit to hear and dispose the appeal The detention memo is set aside and lower authorities are directed to withdraw the detention memo and handover the possession of machinery to appellant - the appellant has made out a case for the waiver of pre-deposit of interest and penalties - Rest of the amount to be waived till the disposal Stay granted.

Summary

Issues:
- Eligibility to avail cenvat credit on service tax for laying pipelines
- Detention of machinery for recovery of interest and penalties

Analysis:
The judgment by the Appellate Tribunal CESTAT AHMEDABAD involved a stay petition for the waiver of pre-deposit of duty amounting to Rs.20,25,408/-, along with interest and equivalent penalty. The adjudicating authority had confirmed the amounts with interest and penalties, which were upheld by the first appellate authority. The key contention revolved around the eligibility of the appellant to avail cenvat credit on input services provided by the service provider for laying pipelines used to draw water from a bore well. The appellant argued that the denial of credit was based on the pipelines running into the factory from an external location, which was deemed unrelated to manufacturing final products. The appellant had already deposited the cenvat credit amount sought to be reversed during the pendency of the stay petition, which was supported by evidence in the RG-23 part 2 entry. The appellant cited a judgment from the Hon'ble High Court of Bombay to support their case.

The Appellate Tribunal considered both sides' submissions and concluded that the issue at hand concerned the eligibility of availing cenvat credit on service tax for laying pipelines to draw water from a source located 10 kilometers away from the factory premises. The Tribunal determined that such services would indeed be eligible for cenvat credit since the transported water was used in manufacturing pharmaceutical goods. Given that the appellant had already deposited the entire service tax liability, the Tribunal deemed it sufficient for hearing and disposing of the appeal. Consequently, the Tribunal waived the pre-deposit of the remaining amounts in the form of interest and penalties, staying the recovery until the appeal's disposal. The Tribunal also ordered the withdrawal of the detention memo for the machinery, emphasizing that the appellant had made a case for the waiver of pre-deposit of interest and penalties. The lower authorities were directed to return the machinery to the appellant, setting aside the detention memo issued on a previous date.