2014 (12) TMI 165 - HC - Service Tax

Waiver of pre deposit - CENVAT Credit - Capital goods - Use of pipeline system instead of pipes - Held that - There are multiple questions of law which require examination in the appeals. We also notice that there are sizeable duty amounts arising out of the Tribunal s judgment, even after deletion of penalty and denial of extended period to the Department. At the same time, we also notice that GSPL is a Government company. Therefore, at this stage the appellant-GSPL would deposit with the respondent, 50% of the duty demand arising out of the judgment of the Tribunal. Counsel far the GSPL pointed out that the respondent has not yet quantified such demand after the judgment of the Tribunal. This shall be done within a period of two weeks from the date of receipt of copy of this order. The appellant thereafter to make deposit as mentioned above within six weeks therefrom. Considering the fact that GSPL is a Government company, there shall be no further requirement of any security for remaining demand. - Decided partly in favour of assessee.

Summary

Issues:
1. Recovery of CENVAT credit by the Commissioner of Central Excise.
2. Utilization of pipeline system and pipes for providing output services.
3. Interpretation of Notification No. 12 of 2013 regarding the value of service rendered by contractors.
4. Tribunal's decision to confirm duty demand but delete penalty and invocation of extended period.
5. Appeals filed by both parties against the Tribunal's judgment.

Analysis:
1. The Gujarat State Petronet Limited (GSPL) filed applications challenging the recovery of CENVAT credit by the Commissioner of Central Excise based on show cause notices. The Commissioner alleged that GSPL utilized the pipeline system instead of pipes for providing output services, questioning the eligibility of credit for the pipeline system as capital goods. The Commissioner also highlighted the use of pipes by GSPL for constructing the pipeline system, not for transportation of goods, leading to the demand for recovery of CENVAT credit along with interest.

2. The Commissioner referred to Notification No. 12 of 2013, indicating that the value of services rendered by contractors included the value of pipes as inputs. This raised concerns regarding the interpretation of the notification in relation to the contractor's use of pipes. Despite GSPL's objections, the Commissioner confirmed the duty demand, including interest and penalties, emphasizing the nature of the services provided and the use of the pipes in the construction process.

3. GSPL appealed to the Tribunal seeking relief, resulting in the confirmation of the duty demand while the penalty and invocation of the extended period were deleted. Subsequently, both parties filed appeals against the Tribunal's judgment, which were admitted for further review by the High Court. The Court acknowledged the significant duty amounts involved, even after the Tribunal's modifications, and considered the status of GSPL as a Government company in the decision-making process.

4. After hearing arguments from both sides and examining the case documents, the High Court identified multiple legal questions requiring scrutiny in the appeals. To address the duty demand arising from the Tribunal's judgment, the Court directed GSPL to deposit 50% of the amount with the respondent within a specified timeline. The Court also emphasized the need for quantification of the demand by the respondent within two weeks and subsequent deposit by GSPL within six weeks, waiving the requirement for additional security due to GSPL's status as a Government company.

5. Ultimately, the Civil Applications were disposed of in accordance with the Court's directives, providing a framework for the deposit of the duty demand by GSPL and ensuring a structured resolution of the ongoing legal dispute surrounding the recovery of CENVAT credit and related penalties.