2008 (11) TMI 200 - AT - Service Tax

Cenvat Credit of Service Tax Held that Cenvat Credit Rule 2004 is a composite Rule to provide credit in relation to manufacture as well as non-manufacture activities. Therefore once the appellant has taken help of second limb of Rule 2(l) as to the definition of input service it was its duty to satisfy authorities below with relevant evidence to prove that they were entitled to credit in accordance with law so that failure to adduce evidence would not have been found place in order of adjudication. - Cenvat Credit Rule 2004 cannot be read in isolation and claim of the appellant falling in majority of the cases on second limb of definition the Appellant should have led evidence for its defence. Stay granted partly.

Summary

Issues:
- Interpretation of 'input service' under Cenvat Credit Rules, 2004
- Admissibility of Cenvat credit for various activities
- Scope of adjudication beyond show cause notice charges
- Requirement of evidence for Cenvat credit claims
- Justifiability of pre-deposit waiver

Interpretation of 'input service' under Cenvat Credit Rules, 2004:
The advocate for the appellant argued that the definition of 'input service' under Rule 2(2)(b) of the Cenvat Credit Rules, 2004 includes various activities beyond manufacturing, such as marketing, modernization, renovation, or repair of the factory. He contended that the show cause notice wrongly focused on the place of goods removal for service tax credit, emphasizing that the citus for providing service is immaterial. The Tribunal acknowledged the two limbs of the definition of 'input service' and noted that the majority of the services claimed by the appellant fell under the second limb relating to non-manufacturing activities.

Admissibility of Cenvat credit for various activities:
The Tribunal highlighted that the Cenvat Credit Rule, 2004 encompasses both manufacturing and non-manufacturing activities. While the show cause notice and adjudication primarily focused on manufacturing activity, the Tribunal emphasized the need for the appellant to provide relevant evidence to support their entitlement to credit in accordance with the law. Despite the absence of a live link or nexus between the expenses and activities carried out by the appellant, the Tribunal recognized the necessity for a thorough examination to allocate the respective services to manufacturing and non-manufacturing activities.

Scope of adjudication beyond show cause notice charges:
The appellant argued that the adjudication went beyond the charges specified in the show cause notice, citing various judgments to support the contention that such assessments are flawed. The Tribunal acknowledged the need for adjudication to align with the charges in the notice but emphasized that a composite rule like the Cenvat Credit Rule, 2004 should be considered holistically. The Tribunal opined that the appellant should have presented evidence to substantiate their claims, especially for services falling under the second limb of the 'input service' definition.

Requirement of evidence for Cenvat credit claims:
The Tribunal noted that the appellant failed to provide relevant documents and evidence to the adjudicating authority, which led to the authority's finding that no evidence was presented to demonstrate that the expenses were related to the manufacture of the final product. Emphasizing the importance of evidence in supporting Cenvat credit claims, the Tribunal deemed it necessary for the appellant to make a pre-deposit to protect the revenue's interest pending further examination of the matter.

Justifiability of pre-deposit waiver:
After considering the submissions from both sides and the specific circumstances of the case, the Tribunal directed the appellant to make pre-deposits in specific amounts within a specified period. The Tribunal highlighted the necessity of ensuring the attribution of services to the claimed credits, citing relevant legal precedents and the peculiarity of the case. The Tribunal's decision aimed to balance the interests of revenue with the appellant's financial situation, following the principles outlined in specific court decisions.

Conclusion:
The Tribunal's detailed analysis focused on the interpretation of 'input service,' the need for evidence to support Cenvat credit claims, and the scope of adjudication in alignment with show cause notice charges. The decision to require pre-deposits was justified by the complexity of the case and the importance of protecting the revenue's interests pending further examination. Compliance with the Tribunal's directions was mandated to stay the realization of the balance demand in all three appeals until their disposal.