2014 (6) TMI 242 - AT - Service Tax

Waiver of pre-deposit - convention service - availing CENVAT Credit while availing benefit of abatement notification 1/2006 ST - Held that - applicant has categorically claimed that they had not availed credit on input service for the period October, 2005 to March, 2007 therefore, they are eligible to abatement under Notification No. 1/06-ST dated-1/3/2006. We find force in his argument that merely because that they would be eligible to avail credit in future, would not disentitle them from availing the abatement under Notification 1/06-ST dated 1/3/2006, where the condition is specific on the availment of CENVAT credit and not laid down to eligibility of CENVAT credit in future. Regarding the demand for the period March, 2007 to April, 2008, prima facie, we find that the applicant had availed CENVAT credit on various input services which have nexus with convention service provided by them. Consequently, prima facie, we find that the applicant had not complied with the condition of Notification No. 1/06-ST dated-1/3/2006 relating to the period April, 2007 to March, 2008. No financial hardship has been pleaded - Conditional stay granted.

Issues:
1. Waiver of pre-deposit of demand and penalty under Section 78 of the Finance Act.
2. Availment of CENVAT credit on input services for the period October 2005 to April 2008.
3. Compliance with Notification No. 1/06-ST dated-1/3/2006 regarding abatement on convention services.
4. Barred by limitation for demand issued on 20th April, 2011.
5. Financial hardship plea and directive for deposit.

Analysis:
The judgment pertains to an application seeking waiver of pre-deposit of demand amounting to Rs.1.19 Crores and an equal penalty under Section 78 of the Finance Act. The applicant had discharged service tax on various taxable services, including 'convention service', during the period from October 2005 to April 2008. The applicant claimed to have not availed CENVAT credit on input services for the period October 2005 to March 2007, making them eligible for abatement under Notification No. 1/06-ST dated 1/3/2006. However, for the period April 2007 to April 2008, the applicant had availed CENVAT credit on input services under Rule 6 (5) of CENVAT Credit Rules, 2004, but argued that these credits were not utilized for providing taxable output services on convention services.

The Revenue contended that the applicant had availed CENVAT credit on input services common to both exempted and dutiable services, thereby not complying with the conditions of Notification No. 1/06-ST dated 1/3/2006. The Revenue argued that the credit availed on input services had a nexus with the output services rendered, making the abatement inadmissible to the applicant. After hearing both sides and examining the records, the Tribunal found that the applicant had indeed not availed credit on input services for the period October 2005 to March 2007, making them eligible for abatement under the said notification. However, for the period April 2007 to April 2008, the Tribunal observed that the applicant had availed CENVAT credit on input services with a nexus to the convention services provided, thus not complying with the conditions of the notification.

The Tribunal directed the applicant to deposit Rs.25.00 Lakh within eight weeks, and upon such deposit, the balance dues adjudged would be waived, and recovery stayed during the appeal's pendency. Failure to comply with the deposit directive would result in the dismissal of the appeal without further notice. The decision was made considering the interest of Revenue and the legal principles established by the High Court and Supreme Court in similar matters. Compliance was to be reported on 22/4/2014 as per the order pronounced in the open Court.

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