2015 (3) TMI 286 - AT - Service Tax

Denial of CENVAT Credit - contractor provided the services in the premises of Thermal Power Station and the Operation and Maintenance service were rendered to the Thermal Power Station for collecting Dry Fly Ash, which has no relation to the manufacturing activity of cement - Held that - Prime facie, it is not clear whether the Fly Ash Handling System installed in the Thermal Power Station is the applicant's property. The case laws relied upon by the applicant are not applicable in the facts and circumstances of the present case. In view of that, we direct the applicant to make a pre-deposit of ₹ 15,00,000 within a period of eight weeks. Upon deposit of the said amount, pre-deposit of the balance amount of tax along with interest and penalty is waived and stay recovery thereof till the disposal of the appeal. - Partial stay granted.

Summary

Issues: Denial of Cenvat credit for service tax paid on procurement and movement of Fly ash used in cement manufacturing.

Analysis:
1. The appellant, engaged in cement manufacturing, was denied Cenvat credit by the Commissioner for service tax paid on the procurement and movement of Fly ash to service providers. The Commissioner contended that the services provided by contractors for collecting Dry Fly Ash from a Thermal Power Station were not related to the manufacturing activity of cement.

2. The appellant argued that the services rendered by the contractors for collecting Fly Ash were essential inputs used in the manufacturing process of cement, thus falling under the definition of Input Services Credit as per Rule 2(l) of the CENVAT Credit Rules. The appellant cited various decisions to support their claim, emphasizing the relevance of Fly Ash in cement production.

3. The Revenue's representative countered the appellant's argument by stating that there was no evidence to prove ownership of the Fly Ash Handling System in the Thermal Power Station by the appellant. The representative highlighted that the cases cited by the appellant involved situations where the property belonged to the assessee, which was not the case in the present scenario.

4. Upon reviewing the agreement presented by the appellant's counsel, the Tribunal noted ambiguity regarding ownership of the Fly Ash Handling System in the Thermal Power Station. The Tribunal found that the case laws cited by the appellant were not directly applicable to the current circumstances, as ownership of the system was a crucial factor in determining eligibility for Cenvat credit.

5. Consequently, the Tribunal directed the appellant to make a pre-deposit of Rupees Fifteen Lakhs within eight weeks, pending further proceedings. The pre-deposit would allow for the waiver of the balance amount of tax, interest, and penalty, with a stay on recovery until the appeal's final disposal. The appellant was instructed to report compliance by a specified date to ensure procedural adherence.