2015 (3) TMI 74 - AT - Central Excise

Waiver of predeposit - Availment of ineligible credit - Held that - Applicant is a manufacturer of computers and they are paying central excise duty and are availing CENVAT credit on inputs and input services. I find that the Tribunal in the case of KPMG (supra) has held that input service is wide and the scope is enlarged. Applicant has made out a prima facie case for waiver of predeposit of entire dues. Accordingly, predeposit of duty along with interest and penalty are waived and recovery thereof stayed during the pendency of the appeal - Stay granted.

Summary

Issues:
Waiver of predeposit of duty on input services availed by the applicant.

Analysis:
The applicant filed for waiver of predeposit of duty amounting to Rs. 5,27,731/- along with interest and penalty on various input services. The adjudicating authority confirmed the demand of duty as ineligible credit on input services, leading to an appeal against the disallowance of CENVAT credit amounting to Rs. 3,46,472/-. The Commissioner (Appeals) allowed credit on security service and advertisement service but disallowed credit on other services. The applicant, a computer manufacturer paying central excise duty, argued that services like outward courier, telephone service, housekeeping service, and cargo handling service are integral to their manufacturing process. The applicant cited Tribunal decisions to support their claim and requested waiver of predeposit during the appeal.

The Revenue's representative contended that the applicant failed to establish a direct relationship between the input services and the final product's manufacture. Referring to a Tribunal order, it was emphasized that the nexus between input services and final product manufacture must be proven for availing CENVAT credit. The representative highlighted that the Tribunal decision cited by the applicant was not applicable to the present case due to a change in relevant notification.

After considering both arguments and reviewing the records, the judge noted that the applicant, a computer manufacturer, avails CENVAT credit on inputs and input services. Referring to a Tribunal decision, it was observed that the definition of 'input service' is broad and inclusive. The judge found that the applicant had a prima facie case for waiver of predeposit of entire dues. Consequently, predeposit of duty, interest, and penalty were waived, and recovery was stayed during the appeal period. The stay application was allowed, and the decision was pronounced in open court.