2014 (7) TMI 117 - AT - Service Tax

Waiver of pre-deposit - CENVAT Credit - reversal of credit with interest whether amount to non availment of credit - Non maintenance of records - Held that - Rule 6 of the Cenvat Credit Rules has been amended retrospectively in 2002 vide Finance Act, 2011 and the Tribunal in the case of Jost s Engineer cited 2013 (8) TMI 463 - CESTAT MUMBAI relied upon by the applicants held that reversal of credit by the assessee on the entire input service credit taken alongwith interest amounts to non availament of credit therefore the provisions of Rule 6 (3) of Cenvat Credit Rules are not attracted. In view of the above decision, prima facie the applicants have made out a strong case for waiver of pre-deposit on merits. Pre-deposit of the dues is therefore waived and recovery thereof stayed for hearing of the appeal - Stay granted.

Summary

Issues:
Waiver of pre-deposit of service tax, interpretation of Rule 6(3) of the Cenvat Credit Rules, reversal of credit on common input services, applicability of case law in similar matters.

Analysis:
The judgment revolves around the issue of waiver of pre-deposit of service tax amounting to Rs. 8,45,20,824/-, interest, and penalty. The applicants, engaged in providing taxable and exempted services, availed credit of service tax on common input services. The Revenue contended that as per Rule 6(3) of the Cenvat Credit Rules, the applicants, by not maintaining separate records for taxable and exempted services, were liable to pay a certain percentage of the value of exempted taxable services. The applicants argued that they had already reversed the total credit on common input services along with interest, citing a Tribunal decision in a similar case. The Revenue, however, relied on the findings of the adjudicating authority and a High Court decision, emphasizing the non-reversal of proportionate credit for taxable services used in providing exempted services.

The Tribunal observed that Rule 6 of the Cenvat Credit Rules was retrospectively amended in 2002, and based on a previous decision cited by the applicants, held that the reversal of credit on entire input services with interest amounted to non-availment of credit, thus Rule 6(3) was not applicable. Consequently, the Tribunal found that the applicants had a strong case for waiver of pre-deposit on merits. As a result, the pre-deposit of dues was waived, and the recovery stayed for the appeal hearing. The Tribunal allowed the stay petition, indicating a favorable outcome for the applicants in this matter.