2014 (7) TMI 324 - AT - Service Tax

Waiver of pre deposit - Denial of CENVAT Credit - On-line information and Database access/retrieval, Internet Cafe, Leased Circuit services - Trading activity - reversal of proportionate credit not accepted - non maintenance of separate accounts for trading activity and other services activities - Held that - when the applicants are maintaining separate accounts for the input services attributable to taxable services and non-taxable services and for the common input services, they have reversed the amount attributable to non-taxable services, which is sufficient in compliance to the provisions of Section 35F of the Central Excise Act, 1944, we waive the requirement of predeposit of the balance amount of service tax, interest and penalty and stay recovery thereof during pendency of the appeal - Stay granted.

Summary

Issues: Cenvat credit denial for trading activity, maintenance of separate accounts, applicability of Rule 3(1) of CCR 2004, Tribunal's previous stay orders.

Issue 1: Cenvat credit denial for trading activity
The judgment revolves around the denial of Cenvat credit on the ground that the applicants were engaged in trading activity without maintaining separate accounts. The adjudicating authority confirmed the denial of credit on common input services used in trading activity, demanding a significant amount along with interest and penalty.

Issue 2: Maintenance of separate accounts
The learned advocate representing the applicant argued that they had reversed a proportionate amount of credit for input services used in trading activities. He cited previous Tribunal stay orders in their favor, emphasizing that they had maintained separate accounts for taxable and non-taxable services, complying with the provisions of Section 35F of the Central Excise Act, 1944.

Issue 3: Applicability of Rule 3(1) of CCR 2004
The Revenue contended that Cenvat credit for service tax paid on input services used for trading activity is not admissible as trading activity is not considered a service. They referred to Rule 3(1) read with Rule 2(l) of CCR 2004, arguing that the applicants failed to demonstrate that trading activity was limited to one Strategic Business Unit (SBU). Additionally, they relied on a Board's circular and a relevant case law to support their position.

Issue 4: Tribunal's previous stay orders
After hearing both sides and reviewing the records, the Tribunal found that the applicant had not maintained separate accounts for trading activity and other services. However, considering the previous stay orders in the applicant's own case, the Tribunal waived the predeposit of the entire amount of tax, interest, and penalty until the appeal's disposal, linking the current appeal with a previous one for further proceedings.

This judgment highlights the importance of maintaining separate accounts for different business activities to determine the admissibility of Cenvat credit, the application of relevant rules and circulars, and the significance of previous Tribunal decisions in similar cases for establishing precedents and influencing current judgments.