2014 (3) TMI 516 - AT - Central Excise

Penalty - Waiver of pre deposit - Stay in respect of CENVAT credit - Denial of CENVAT credit on works contract services , catering services , event management services - Bar of limitation - Held that - demand is within the normal period. In the other case, it is for the extended period. The argument of the learned counsel is that all the services in question were mentioned in the service tax returns filed periodically during the period of dispute. It is claimed that relevant extracts from the CENVAT credit register were also produced with the returns. In this scenario, according to the learned counsel, the appellant cannot be held to have suppressed any fact with intent to avail undue benefit. Nevertheless, no documentary proof is available on record. Not even a specimen copy of the service tax return, nor even a specimen extract from CENVAT credit register has been produced. The plea of limitation, therefore, remains unsubstantiated. Mangalore Refinery and Petrochemicals Ltd. has not pleaded financial hardships - Conditional stay granted.

Issues:
1. Stay application for waiver and stay of CENVAT credit and penalty imposed.
2. Denial of CENVAT credit on various services used for residential colony maintenance.
3. Interpretation of the definition of input service under CENVAT Credit Rules, 2004.
4. Nexus between services provided and business activity of the manufacturer.
5. Precedent value of High Court decisions in similar cases.
6. Prima facie case on the ground of limitation.
7. Financial hardships plea.
8. Reversal of amount in CENVAT account not considered by lower authorities.

Analysis:

1. The appellant filed stay applications seeking waiver and stay concerning denied CENVAT credit and penalties. The demands arose from denial of credit on services like 'works contract services', 'catering services', and 'event management services' used for residential colony maintenance, lacking integral connection with the manufacturing business.

2. The definition of input service under the CENVAT Credit Rules, 2004 was crucial. High Court cases like Commissioner Vs. Ultratech Cement Ltd. emphasized the need for an integral connection between services and the manufacturer's business activity. Similarly, Commissioner Vs. Manikgarh Cement clarified that welfare activities, like residential colony repairs, may not qualify as input services due to the lack of nexus with the manufacturer's business.

3. The High Court's stance in Commissioner Vs. Gujarat Heavy Chemicals Ltd. was referenced to determine if security services provided in residential quarters could be considered an input service. The court ruled against it, emphasizing the absence of a direct or indirect relation to the manufacturing activity, aligning with the decision in Manikgarh Cement case.

4. The Tribunal found support in the above rulings rather than in decisions involving activities in residential colonies. The absence of a precedent value in those cases led to reliance on the High Court judgments cited by the Superintendent(AR) for the present case.

5. No prima facie case on the ground of limitation was established. The appellant's argument of mentioning services in service tax returns lacked documentary proof, rendering the plea unsubstantiated. Additionally, the appellant's financial hardships were not adequately pleaded.

6. The appellant's claim of reversing an amount in the CENVAT account was not substantiated with any supporting documents. The Tribunal directed the appellant to predeposit the total CENVAT credit amount and report compliance within a specified timeframe, with waiver and stay of penalties contingent on due compliance.

This detailed analysis of the judgment highlights the key legal issues, interpretations of relevant rules, and the Tribunal's decision based on the facts presented and legal precedents cited.

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