2014 (8) TMI 30 - AT - Service Tax

Waiver of pre-deposit of duty - input service distributor (ISD) - Goods manufactured on behalf of other Company - Tax paid by company for whom goods were manufactured - Assessee availed credit for tax paid by that company - Held that - The applicants are independent manufacturers and are paying Central Excise duty being independent manufacturer. As per the provisions of Rule 7 of the Cenvat Credit Rules, 2004 the input service distributor may distribute the Cenvat Credit in respect of Service Tax paid on the input service to its manufacturing units. A reading of the above provision of Rule 7 of the Cenvat Credit Rules, 2004 it is clear that input service distributor can distribute Service Tax paid on the input service to its manufacturing units. In the facts and circumstances of the present case, it cannot be said the applicants are manufacturing unit of M/s. Merck. Further, we find that as per the definition of input service distributor as provided under Cenvat Credit Rules, 2004, input service distributor means an office of the manufacturer or producer of final products or provider of output service. In view of the facts and circumstances of the present case, office of M/s. Merck cannot be held to be the office of the present applicants who are independent manufacturers. Invocation of extended period of limitation - Held that - applicants were filing monthly returns in respect of credit availed and utilised towards payment of duty, hence, prima facie the argument that the demands are beyond the normal period of limitation is not sustainable. Following decision of Benara Valves Ltd. v. Commissioner of Central Excise 2006 (11) TMI 6 - SUPREME COURT OF INDIA - Conditional stay granted.

Summary

Issues:
Waiver of pre-deposit of duty, interest, and penalty under Section 35F of the Central Excise Act for two applicants, interpretation of input service distributor rules, determination of undue hardship for waiver consideration, time bar issue for demands, compliance with Supreme Court judgment on undue hardship.

Analysis:
1. Waiver of Pre-deposit: The applications by two companies sought waiver of pre-deposit of significant amounts of duty, interest, and penalty under Section 35F of the Central Excise Act. The issue involved determining whether the applicants were entitled to such waivers based on the circumstances of their cases.

2. Input Service Distributor Rules: The dispute centered around whether the applicants, acting as job workers for another company, could avail credit for Service Tax paid by that company. The Revenue argued that the applicants were independent manufacturers, not entitled to such credit under Rule 7 of the Cenvat Credit Rules, 2004, which allows distribution of Cenvat Credit to manufacturing units only.

3. Undue Hardship Consideration: The judgment referred to the Supreme Court's interpretation of Section 35F, emphasizing the need to balance considerations of undue hardship to the applicants and safeguarding the interests of revenue. The applicants needed to establish undue hardship, which required more than mere assertion and must be disproportionate to the circumstances.

4. Time Bar Issue: The Revenue contended that the demands were not time-barred, as the applicants were filing monthly returns showing credit availed and utilized for duty payment. The argument was made that a significant portion of the demands fell beyond the normal period of limitation, raising questions about the timeliness of the demands.

5. Compliance with Supreme Court Judgment: Citing the Supreme Court's decision on undue hardship, the Tribunal found that total waiver of dues was not warranted in the present case. Instead, specific amounts were directed to be deposited by the applicants within a stipulated period to qualify for waiver of pre-deposit and stay of recovery for the remaining amounts during the appeal process.

In conclusion, the judgment addressed the complex issues of waiver of pre-deposit, interpretation of input service distributor rules, assessment of undue hardship, time bar considerations, and compliance with the Supreme Court's guidance on undue hardship in the context of the Central Excise Act. The decision provided a nuanced analysis of each issue, ultimately directing the applicants to make specified deposits to qualify for partial waiver and stay of recovery during the appeal proceedings.