2014 (10) TMI 644 - AT - Service Tax

Waiver of pre deposit - Reversal of CENVAT Credit - CVD taken on import of goods - Held that - Prior to 1-4-2011, in the absence of any specific procedure or specific provisions of law, the appellants cannot be found fault with for entertaining the belief that they are eligible for the credit. However the appellant has reversed the Cenvat credit attributable to the normal period amounting to ₹ 6,43,007 - table shows the total value of manufactured goods, total value of exempted goods and total value of traded goods and proportion worked out, in our opinion, on a prima facie basis, is correct. The entire tax has been paid for the normal period. Whether the extended period is invocable or not is required to be considered in greater detail in the light of facts and circumstances, case laws, etc. In view of the above, we are of the view that at this stage, the amount deposited by the appellant is sufficient for the purpose of hearing the appeal - requirement of pre-deposit of balance dues is waived and stay against recovery is granted during the pendency of appeal. - Stay granted.

Summary

Issues Involved:
- Whether the appellant is required to reverse the Cenvat credit of CVD taken on import of goods.

Analysis:
1. The appellant contested the demand on merits and limitation, highlighting the amendment in Cenvat Credit Rules from 1-4-2011, defining trading as a service separately. The appellant reversed the Cenvat credit for the normal period but disputed the denial of the entire input Service Tax credit. The table provided by the appellant for calculating the reversal of proportionate credit was found to be correct on a prima facie basis. The issue of invoking the extended period for recovery needed further examination based on facts and case laws.

2. The learned AR opposed the waiver of pre-deposit, citing the NITCO Ltd. case where trading was not considered a service before 2011, thus no credit could have been taken for trading activities. Rule 3(1) of CCR was referred to, emphasizing that no credit could be taken for trading activity. However, the Tribunal differentiated the present case from NITCO Ltd., stating that the denial of credit was not solely based on trading activity, and the retrospective effect of the amendment made on 1-4-2011 required detailed examination.

3. The Tribunal observed that when a manufacturer is involved in both trading and manufacturing activities, the reversal of proportionate credit is appropriate for common input services. The AR's argument regarding the retrospective effect of the 2011 amendment was not entirely convincing at that stage and necessitated further scrutiny during the final hearing. Consequently, the Tribunal waived the requirement of pre-deposit for the balance dues and granted a stay against recovery during the appeal's pendency.