2014 (8) TMI 199 - AT - Service Tax

Waiver of pre deposit of Service Tax and CENVAT Credit - Inclusion of value of free issue materials received by the Applicant, in the taxable value - Held that - Following decision of Bhayana Builders (P) Ltd. vs. CST, Delhi 2013 (9) TMI 294 - CESTAT NEW DELHI - Decided in favour of assessee. Whether the services rendered by the Applicant, are in the nature of Construction Services or Works Contract Services for the period, 2004-05 - Held that - availment of CENVAT Credit by the Applicant on inputs services, which have been used for all the output services i.e. taxable and exempted services, also cannot be said to be not irregular, at this stage, without considering the evidence on record adduced by both sides. In the result, the Applicant could not able to make out a prima facia for total waiver of the dues adjudged relating to demand of CENVAT Credit and rendering of Commercial or Industrial Construction Services for the period, 2004-05 - Conditional stay granted.

Summary

Issues:
Application seeking waiver of pre-deposit of Service Tax and CENVAT Credit of Rs. 1.65 crore and penalties imposed under various provisions of Finance Act, 1994 and CENVAT Credit Rules, 2004.

Analysis:

1. Demand on Inclusion of Value of Free Issue Materials:
The Advocate for the Applicant argued that a significant portion of the demand, around Rs. 1.44 crore, was related to the inclusion of the value of free issue materials in the taxable value of services provided. He contended that this inclusion was contrary to the decision of the Larger Bench in the case of Bhayana Builders (P) Ltd. vs. CST, Delhi. The Commissioner's finding on this issue was challenged as being legally flawed. The Tribunal acknowledged the relevance of the Bhayana Builders case and found merit in the Applicant's argument. Consequently, the Tribunal directed the Applicant to deposit Rs. 5.00 lakh, considering the financial hardship expressed, and waived the balance dues related to this specific demand.

2. Classification of Services as 'Works Contract Services':
The dispute also involved the classification of services rendered by the Applicant as either 'Construction Services' or 'Works Contract Services' for the period 2004-05. The Commissioner had observed that the services did not qualify as 'Works Contract Services.' The Tribunal noted that this determination was based on evidence and not manifestly incorrect. The Tribunal found that the Applicant failed to establish a prima facie case for total waiver concerning this aspect. However, the Tribunal did not dismiss the possibility of revisiting this issue upon further evidence.

3. Availment of CENVAT Credit on Input Services:
Regarding the availment of CENVAT Credit on input services, the Applicant's Advocate argued that the Commissioner did not provide a clear finding on the wrong availment or non-admissibility of the credit. The Tribunal recognized the lack of a categorical determination by the Commissioner on this matter. The Tribunal emphasized the need for a more detailed examination of the evidence before making a conclusive decision. As a result, the Tribunal did not sustain the demand solely based on the Commissioner's observations.

In conclusion, the Tribunal partially granted the Applicant's request for waiver, considering the specific issues raised regarding the demand on the inclusion of free issue materials and the classification of services. The Tribunal directed the Applicant to deposit a specified amount while staying the recovery of the remaining dues pending the appeal process.