2008 (11) TMI 240 - AT - Service Tax

Stay Cenvat Credit input service - technical testing and analysis service held that - the service obtained by the appellant appears to be an essential part of the manufacturing process. Therefore, the credit appears to be admissible. However, when it comes to the question of utilization, with the requirement of 1 1 co-relation, no longer a requirement part of the law, once the admissible credit is taken, it can be used for payment of duty on any of the final products. The only restriction being provided under Rule 6 of Cenvat Credit Rules - , the appellants have made a reasonably strong prima facie case and therefore, we waive recovery of pre-deposit of entire amount of duty with interest and penalty imposed upon the appellant and stay recovery of the same during the pendency of the appeal

Summary

Issues:
Waiver of pre-deposit and grant of stay against recovery of Cenvat credit.

Analysis:
The appellants sought waiver of pre-deposit and stay against recovery of Cenvat credit amounting to Rs. 2,06,32,909/- along with a penalty of Rs. 10,000 imposed on them. The Commissioner disallowed Cenvat credit on various services, including Technical Testing and Analysis service, commission paid to foreign agents, courier service charges, Clearing and Forwarding agent's service, and service tax for Repair and Maintenance. The advocate for the appellant argued that the services were essential for the manufacturing process, citing relevant Tribunal decisions supporting their case.

The dispute primarily revolved around the admissibility of Cenvat credit on the services disallowed by the Commissioner. The advocate argued that the services were crucial for the manufacturing process, as evidenced by Tribunal decisions supporting their position. The Revenue, however, reiterated the Commissioner's logic, emphasizing that the appellants had not yet started manufacturing and were uncertain about future production, thus questioning the eligibility of the credit.

Upon considering the arguments, the Tribunal found that the services in question, especially Technical Testing and Analysis service, were integral to the manufacturing process. They noted that proper testing was essential before commercial production could commence, making the service a necessary part of manufacturing. The Tribunal also highlighted the importance of a 1:1 co-relation for credit utilization, pointing out that the admissible credit could be used for any final product payment, subject to Rule 6 of the Cenvat Credit Rules.

In their analysis, the Tribunal referenced the case of M/s. Duracell (India) Pvt. Ltd., emphasizing the entitlement of credit even for trial production under certain circumstances. They disagreed with the Commissioner's differentiation of this case, finding it unconvincing. The Tribunal also addressed the admissibility of courier services, commission agent services, and Repair and Maintenance services, deeming them prima facie admissible. Ultimately, the Tribunal concluded that the appellants had presented a strong prima facie case, warranting the waiver of pre-deposit and stay against recovery of the disputed amount during the appeal process.