2014 (8) TMI 896 - AT - Service Tax

Waiver of pre deposit - CENVAT Credit - Availment on SIM cards - credit has been denied on the ground that SIM Cards are capital goods classifiable under Chapter CETH 85 - Held that - appellants purchase the SIM Cards, load the software and thereafter sell it through the dealers and after sale to a customer, the SIM Card is activated and the process of provision of Telecommunication service commences. That being the position, the claim of the appellant that SIM Card is an input for them and is used for providing the output service on a prima facie basis seems to be justifiable. Therefore I consider that the appellant has made out a prima facie case in respect of the amount of ₹ 3,25,168/- and therefore the requirement of pre-deposit of this amount has to be waived. Demand of interest on reversal of cenvat credit - Held that - From the reading of Section 75 there is no requirement of determination of the amount to be demanded for demanding interest. In any case in this case there is no dispute as regards the amount of credit wrongly taken and it is a fact that by the time department found out about wrong availment, the appellant had become eligible for the credit from 1-4-2008. That being the position, the a claim that duty should have been quantified and demanded (in this case wrongly availed credit) becomes only a technical formality and there is no clear requirement under Section 75 that such a technical formality should be completed for demanding any interest. If this claim is allowed, the provisions of Rule 14 which requires interest to be paid where credit has been wrongly availed becomes meaningless and no interpretation can be given to the law which will defeat the purpose of any of the provisions of the law. appellant has not been able to make out a case for complete waiver - Partial stay granted.

Summary

Issues involved:
1. Availment of Cenvat credit on capital goods at 100% instead of 50% during April 2006 to March 2007.
2. Availment of Cenvat credit on SIM Cards during the period from April 2006 to September 2006 and October 2006 to September 2007.

Analysis:

Issue 1: Availment of Cenvat credit on capital goods at 100% instead of 50%
The appellant had received capital goods and mistakenly took the entire credit instead of the permissible 50%. The impugned order demanded interest for the 50% wrongly taken credit. The appellant argued that as they had not utilized the credit until becoming eligible later, no interest should be payable. They relied on legal precedents to support their stance. However, the Tribunal cited the decision of the Hon'ble Supreme Court, emphasizing that once credit is wrongly taken, interest is payable regardless of utilization. The Tribunal rejected the argument that interest cannot be demanded without determining the duty amount, stating that such a technicality should not defeat the purpose of the law. The appellant was directed to deposit the demanded amount within a specified timeline.

Issue 2: Availment of Cenvat credit on SIM Cards
Regarding the Cenvat credit on SIM Cards, the appellant contended that the cards were essential inputs for providing Telecommunication Service and therefore credit should be admissible. The Tribunal found the appellant's claim justifiable, considering the SIM Cards as inputs used for output services. Consequently, the requirement of pre-deposit for a specific amount was waived. The Tribunal differentiated the case from a previous judgment, stating that the appellant did not reverse the credit before the demand was made, thus not exempting them from interest payment. The Tribunal upheld the demand for interest on the wrongly taken credit for SIM Cards.

In conclusion, the Tribunal ruled in favor of the Revenue on both issues, directing the appellant to deposit the demanded amounts while granting a stay against recovery during the appeal process.