2014 (3) TMI 140 - AT - Service Tax

GTA services can be treated as output service or not Suo moto credit allowed or refund u/s 11B to be filed - Waiver of Pre-deposit Held that - The show cause notice itself mentions that the recredit had been reflected in the ER-I Return as Cenvat credit statement had been filed with the ER-I Return and that it is from this statement that the department came to know about the recredit - the appellant have declared the fact of re-credit in their ER-I Return and this return was available with the department - the demand prima facie appears to be time barred - Pre-deposit of cenvat credit demand, interest and penalty waived till the disposal Stay granted.

Summary

Issues:
1. Whether the appellant was entitled to recredit the cenvat credit without filing a refund claim under Section 11 B?
2. Whether the demand raised by the department was time-barred?
3. Whether the appellant suppressed relevant facts justifying the invocation of the longer limitation period?
4. Whether the requirement of pre-deposit of cenvat credit demand, interest, and penalty should be waived for hearing of the appeal?

Analysis:

1. The appellant initially paid service tax using cenvat credit but later paid the same amount in cash due to objections from the department. The department issued a show cause notice for recovery of the credit, contending that a refund claim under Section 11 B should have been filed. The appellant argued that no refund application was required based on a Tribunal judgment. The department opposed, citing precedents that recredit without a refund claim is impermissible. The Tribunal noted that the recredit was reflected in the ER-I Return, making the demand prima facie time-barred. The requirement of pre-deposit was waived, and the recovery stayed pending appeal.

2. The appellant contended that the demand was time-barred as the recredit was disclosed in the ER-I Return, which the department had access to. This declaration in the return was crucial in determining the limitation period for raising the demand. The Tribunal found merit in the appellant's argument, considering the timely disclosure in the return as a valid defense against the time-barred demand.

3. The department argued that the appellant suppressed facts, justifying the invocation of the longer limitation period. They claimed that the recredit came to light during an audit by the C & AG's Audit party, indicating suppression. However, the Tribunal found that since the recredit was declared in the ER-I Return, there was no suppression of facts on the appellant's part. This declaration in the return negated the department's argument for invoking the longer limitation period.

4. The appellant sought a waiver of the pre-deposit requirement for the appeal. The department opposed, asserting a strong case on merits and limitation. The Tribunal, considering the disclosure of recredit in the ER-I Return and the time-barred nature of the demand, granted the waiver of pre-deposit for the hearing of the appeal. The stay application was allowed, suspending the recovery of cenvat credit demand, interest, and penalty until the appeal's disposal.