2015 (9) TMI 101 - AT - Service Tax

Waiver of pre deposit - Denial of CENVAT Credit - Premises occupied in pursuance of SARFAESI Act - Land further leased out - Tax paid in the name of borrower - Revenue contends that the tax is to be paid by the Bank - Held that - Bank is not the original owner but only is deemed owner in exercise of the power of lessor under the SRFAESI Act. Further, as the tax has already been paid, which is not disputed and were accepted and further that the show-cause notice have been issued invoking the extended period - we grant waiver of pre-deposit and stay the recovery of tax, interest and penalty till disposal of the appeal. - Stay granted.

Issues:
1. Disallowance of CENVAT Credit on lease rent paid to Bank for a Sugar factory.
2. Applicability of Service Tax on lease rent.
3. Validity of CENVAT Credit availed by the appellant.
4. Interpretation of ownership rights under the SRFAESI Act.
5. Legality of documents for availing CENVAT Credit.

Analysis:

1. The appellant filed an appeal against the disallowance of CENVAT Credit on lease rent paid to the Bank for a Sugar factory under the SRFAESI Act. The Bank leased out the factory to the appellant after taking possession from the defaulting borrower. The Revenue objected to the CENVAT Credit, arguing that the tax was paid in the name of the original owner, not the Bank, making the credit ineligible. The impugned order confirmed the disallowance of credit, along with interest and penalty. The appellant contended that the tax was deposited correctly and challenged the disallowance.

2. The appellant argued that the tax was deposited in the name of the original owner as the Bank was only acting as a trustee under the SRFAESI Act. The appellant maintained that the Bank's ownership was temporary and did not extinguish the borrower's rights. The appellant relied on the provisions of the SRFAESI Act to support their position. The appellant sought a stay during the appeal, emphasizing the legality of the tax payment and ownership arrangement.

3. The Revenue relied on the agreement between the Bank and the appellant, contending that the credit based on the challan was invalid under the Cenvat Credit Rules. The Revenue cited previous tribunal rulings to support their argument. However, the Tribunal found the issue debatable, noting that the Bank was not the original owner but a deemed owner under the SRFAESI Act. The Tribunal granted a waiver of pre-deposit and stayed the recovery of tax, interest, and penalty pending the appeal's final disposal.

4. The Tribunal's decision highlighted the complexity of the ownership rights under the SRFAESI Act and the interpretation of documents for availing CENVAT Credit. The judgment emphasized the temporary nature of the Bank's ownership and the need for further examination of the extended period invoked in the show-cause notice. The Tribunal's ruling focused on the debatable nature of the issue and the necessity to clarify the ownership status and tax payment validity before making a final decision.

5. In conclusion, the Tribunal's detailed analysis of the legal and factual aspects surrounding the disallowance of CENVAT Credit on lease rent provided a nuanced understanding of the complexities involved. The judgment highlighted the importance of legal interpretations under the SRFAESI Act and the necessity for a thorough examination of ownership rights and tax payment procedures in such cases. The Tribunal's decision to grant a waiver of pre-deposit and stay the recovery pending final disposal of the appeal reflected a balanced approach to the intricate legal issues at hand.

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