2014 (8) TMI 738 - AT - Service Tax

Waiver of pre-deposit of service tax, interest and penalties - Insurance Auxiliary Service - whether the appellant can utilize CENVAT Credit available with them for payment of service tax - Held that - Demand is prior to July 2012. The ratio of the above decision is fully applicable to the facts of the present case. Therefore, the applicant has made out a strong case in their favour. Pre-deposit of the dues is waived and recovery of the same is stayed during the pendency of the appeal - Following decision of M/s TATA AIG LIFE INSURANCE CO LTD and others Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI & THANE-II 2014 (4) TMI 637 - CESTAT MUMBAI - Stay granted.

Summary

Issues Involved:
Waiver of pre-deposit of service tax, interest, and penalties based on the denial of cenvat credit utilization for service tax under reverse charge mechanism.

Analysis:
The applicant sought a waiver of pre-deposit of service tax, interest, and penalties due to the denial of cenvat credit utilization for service tax under the reverse charge mechanism. The issue revolved around the interpretation of legal provisions pre and post 19.4.2006 regarding the meaning of 'output service,' 'provider of taxable service,' and 'person liable for paying service tax.' The Tribunal referred to the case of Tata AIG Life Insurance Co. Ltd & others vs. CCE, Mumbai & Thane - II, where it was established that the omission of an explanation did not alter the meaning of these terms. It was clarified that in cases like Insurance Auxiliary Service, where the service tax liability is on the service recipient, the appellants were considered providers of the output service and entitled to avail cenvat credit for payment of service tax. The Tribunal emphasized that there was no requirement for a one-to-one correlation between input and output services under the cenvat credit scheme, rendering the demands for recovery of cenvat credit unsustainable.

The Tribunal also addressed the issue of utilizing cenvat credit in excess of 20% of the service tax payable on the output service before 1.4.2008. Referring to Rule 6(5) of the Cenvat Credit Rules, it was concluded that for services like Insurance Auxiliary Service falling under specified categories, the cap of 20% did not apply, allowing the entire service tax credit to be utilized for tax discharge. Consequently, the appeals filed by appellants Tata AIG, Birla Sun Life, and ICICI Prudential were allowed based on the legal and factual position established.

In the present case, where the demand predated July 2012, the Tribunal applied the ratio of the aforementioned decision, finding it fully applicable to the facts at hand. Consequently, the applicant's strong case in their favor led to the waiver of pre-deposit of dues and a stay on recovery during the appeal's pendency, as allowed by the Tribunal.