2015 (9) TMI 1333 - AT - Service Tax

Waiver of pre deposit - CENVAT Credit - credit on the basis of supplementary invoices for payment of service tax - revenue contended that since service provider has paid the service tax on account of non-levy or non-payment or short payment or short levy of service tax by the reason to fraud collusion wilful mis-statement or suppression of facts or contravention of any provisions of the Finance Act 1944 Held that - CENVAT Credit of service tax paid by the service providers is sought to be denied to the appellant by invoking clause (bb) of Rule 9 (1) of the CENVAT Credit Rules 2004. - neither the show cause notice while making this allegation gives details of the show cause notices issued to the service providers and of the adjudication order confirming service tax demands under proviso to section 73 (1) against them nor such documents had been provided to the appellant. Even the order-in-original besides repeating the allegations contained in para 4 of the show cause notice does not give any details. On the other hand the appellant have made inquiries with certain service providers which have been placed on record which indicate to the contrary. - appellant have strong prima facie case in their favour and hence the requirement of pre-deposit of CENVAT Credit demand interest and penalty is waived for hearing of the appeal and recovery thereof is stayed. - Stay granted.

Summary

Issues involved:
- Allegation of taking CENVAT Credit on the basis of supplementary invoices for service tax evasion
- Application of Rule 9(1)(bb) of CENVAT Credit Rules, 2004
- Burden of proof on the department to provide evidence of service tax evasion by service providers
- Prima facie case in favor of the appellant

Analysis:

The judgment pertains to a case involving the denial of CENVAT Credit to manufacturers of chromium products for the period from November 2011 to July 2012. The dispute arose when the department alleged that the CENVAT Credit claimed by the appellants, amounting to Rs. 3,97,25,526, was based on supplementary invoices for service tax evasion by the service providers. The department invoked clause (bb) of Rule 9(1) of the CENVAT Credit Rules, 2004, which allows the denial of credit if the service tax paid under supplementary invoices was for previously evaded taxes due to fraud, collusion, or misstatement.

During the proceedings, the appellant argued that the department failed to provide details of show cause notices issued to the service providers or the adjudication orders confirming the service tax demands against them. The appellant contended that their inquiries with service providers revealed discrepancies, indicating that the allegations of tax evasion were unfounded. The appellant requested a waiver of the pre-deposit of the CENVAT Credit demand, interest, and penalty, citing a strong prima facie case in their favor.

Upon reviewing the submissions from both sides and examining the records, the tribunal noted that the burden of proof rested with the department to substantiate the allegations of service tax evasion by the service providers. However, the department failed to produce sufficient evidence to support their claims. Consequently, the tribunal found that the appellant had a strong prima facie case in their favor. As a result, the requirement of pre-deposit of the CENVAT Credit, demand, interest, and penalty was waived for the hearing of the appeal, and the recovery was stayed.

In conclusion, the tribunal allowed the stay application, providing relief to the appellants pending the appeal hearing, based on the lack of evidence supporting the allegations of service tax evasion by the service providers and the strong prima facie case presented by the appellants.