2008 (10) TMI 118 - AT - Service Tax

Construction services - allegation that applicants had availed the input service credit and has claimed abatement of 67% of the gross value in terms of Notification No. 1/06-S.T. dated 1-3-2006 for the period March 06 to June 2006 - assessee contention that services though availed in March 2006 to June 2006 were in fact services received by them prior to 1-3-2006 - applicant has already reversed the amount of Cenvat credit - prima facie case for the waiver of pre-deposit stay granted

Summary

Issues:
Waiver of pre-deposit of service tax amount and penalty under Finance Act, 1994 based on availing Cenvat credit on inputs services; Interpretation of Notification No. 1/06-S.T., dated 1-3-2006; Dispute over availing credit post the notification date.

Analysis:
The case involved a dispute over the waiver of pre-deposit of service tax amount and penalty imposed under the Finance Act, 1994, amounting to Rs. 9.74 crores and Rs. 10.82 lakhs, respectively. The applicant, engaged in providing construction services, had availed Cenvat credit on outward freight and claimed abatement under Notification No. 1/06-S.T., dated 1-3-2006. The authorities issued a show cause notice for violating the notification and demanded service tax and penalties. The applicant contended that the credit availed post the notification date was for services received earlier, citing the benefit granted under the previous Notification No. 15/04-ST dated 1-9-2004. The adjudicating authority, however, upheld the demand and penalties.

The applicant argued that the credit availed post the notification date was legitimate as it pertained to services received earlier and was reversed upon detection by the authorities. The applicant highlighted decisions in similar cases to support their stance. On the contrary, the respondent contended that availing credit post the notification date disqualified the applicant from claiming abatement. The Tribunal examined the conditions of both notifications and noted that prior to 1-3-2006, there was no restriction on availing Cenvat credit on service tax paid on inputs services. The Tribunal found merit in the applicant's argument, considering the reversal of the credit and the disproportionate demand compared to the credit amount.

The Tribunal referenced a decision by the Principal Bench in a similar case and opined that the issue could align with precedents set by higher courts. Given the reversal of the credit, the Tribunal concluded that the applicant established a prima facie case for waiving the pre-deposit amount. Consequently, the Tribunal allowed the application for waiver and stayed the recovery pending appeal. Additionally, due to the substantial disputed amount, the Tribunal expedited the appeal hearing. The judgment was pronounced on 14-10-2008, setting the appeal for an out-of-turn hearing on 17-11-2008.