2014 (9) TMI 813 - AT - Service Tax

Waiver of pre-deposit - disallowance of Cenvat credit - various input services for construction of the airport and the passenger terminal building - Held that - Insofar as input services used in respect of hotel construction prima facie since that contractor had availed benefits under the conditional Notification No. 1/2006 prima facie, availment of Cenvat credit by the petitioner appears unauthorized. Similar disentitlement prima facie applies in respect of input services in relation to construction of Fuel farm; on ATF fuel and credit on Volvo chassis. Insofar as ineligible input Service Tax credit of ₹ 4,00,83,247/-, the finding is that these input services were not established to have been utilized in any output service. Insofar as the disallowed component of ₹ 2,60,00,996/- the finding is that capital goods credit taken on goods used in the construction of hotel could not be availed by the petitioner since the contractor who provided the commercial or industrial construction service in relation to the hotel had availed benefits under the conditional Notification No. 1/2006; the dispute on this aspect is of ₹ 2.04 crores. Prima facie, the petitioner appears to have an arguable case in relation to the quantum of ₹ 10,81,22,098/- i.e. in respect of the 16 input services pertaining to the construction of the airport. These services appear to have a more direct and proximate nexus to construction of the airport than to the eventual output service provided from the completed airport, by the petitioner. - stay granted partly.

Summary

Issues:
Waiver of pre-deposit and stay of further proceedings for recovery of adjudicated liability.

Analysis:
The judgment involves the appellant seeking waiver of pre-deposit and stay of proceedings regarding an adjudication order disallowing Cenvat credit. The order dated 29-1-2010 by the Commissioner of Central Excise, Customs & Service Tax, Hyderabad-II disallowed Cenvat credit of significant amounts while upholding some credits as legitimate. The disallowed amounts were appropriated towards the disallowed credit, along with interest and penalty.

The disallowance of Cenvat credit pertained to seven categories of input services, each with specific reasons for disallowance. These included services used in the construction of the airport, hotel, fuel farm, ineligible services, and capital goods. The appellant argued that the disallowed services had a nexus with the taxable services provided, justifying the Cenvat credit availed. However, the Revenue contended that the nexus was remote and inadmissible under the Finance Act, 1994.

The judgment highlighted the specific disallowed amounts for each category of input services, emphasizing the reasons for disallowance based on the applicability of certain notifications and regulations. The Tribunal found the appellant to have an arguable case in relation to certain input services used in airport construction, indicating a more direct nexus with the construction activities.

Ultimately, the Tribunal granted waiver of pre-deposit and stay of proceedings subject to the appellant remitting a specified amount to the Revenue within a set timeframe. Failure to comply would result in the dissolution of the waiver and stay granted. The judgment provided a detailed analysis of each category of disallowed credit and the conditions for granting the waiver and stay, ensuring clarity and compliance with the order.

In conclusion, the judgment addressed the complex issues surrounding the disallowance of Cenvat credit, balancing the arguments of the appellant and the Revenue. The detailed analysis of each category of disallowed credit and the conditions for granting waiver and stay demonstrated a thorough consideration of the legal and factual aspects of the case.