2018 (3) TMI 1431 - AT - Service Tax

Waiver of pre-deposit - Franchisee Services - CENVAT credit - Rule 6(3)(c) of the CCR 2004 - invoices are not in the name of appellant/registered premises of the appellant - Held that - whether the activity undertaken by the appellant falls under the category of Franchisee Services or not has been dealt by this Tribunal in the case of Radico Khaitan Limited Vs. CST 2016 (6) TMI 366 - CESTAT NEW DELHI wherein it was held that the said service does not fall under the category of Franchisee Service - the appellant are not liable to pay service tax under the category of Franchisee Service and it is a case of complete waiver of pre-deposit of demand of service tax. CENVAT credit - Held that - the appellant has not taken excess credit of 20% of their tax liability - also, M/s. Seagram Manufacturing Pvt. Limited in whose name invoices have been issued has merged with the appellant, therefore on that ground, Cenvat credit cannot be denied - Cenvat credit cannot be denied on the premise that address at which the invoices have been issued, is not a registered premise. In fact, the invoices have been issued in the name of appellant and who has received the services. Appellant has made out a prima-facie case for complete waiver of pre-deposit of entire demands confirmed against the appellant - pre-deposit waived - appeal allowed.

Summary

Issues:
1. Waiver of pre-deposit of service tax demand and Cenvat credit demand.
2. Classification of the activity as Franchisee Service.
3. Denial of Cenvat credit on various grounds.

Analysis:
The applicant sought a waiver of pre-deposit of service tax demand amounting to ?42,22,18,962 and Cenvat credit demand of ?53,99,881, including interest and penalties, as per the impugned order. The dispute arose from the appellant's agreement with license holders for manufacturing liquor under their brand name. The Revenue contended that this activity falls under Franchisee Services, leading to the issuance of a show cause notice for service tax demand. Additionally, the proposal aimed to deny Cenvat credit of ?53,99,881, citing reasons such as excess credit utilization and discrepancies in invoices.

The Tribunal considered the classification of the activity as Franchisee Services, referencing a previous case where it was held that such services do not fall under this category. Consequently, the Tribunal ruled that the appellant is not liable to pay service tax under Franchisee Services, warranting a complete waiver of the pre-deposit of the service tax demand.

Regarding the denial of Cenvat credit, the appellant argued that Rule 6(3)(c) of the Cenvat Credit Rules, 2004 should be assessed on a return basis rather than monthly. The Tribunal found that the appellant did not exceed the 20% credit limit based on their tax liability in the returns filed. Moreover, the merger of M/s. Seagram Manufacturing Pvt. Limited with the appellant invalidated the ground for denying Cenvat credit based on invoice details. The Tribunal emphasized that as long as the appellant received services and did not evade service tax, the credit cannot be denied due to discrepancies in the address on the invoices.

Conclusively, the Tribunal held that the appellant established a prima facie case for a complete waiver of pre-deposit for the demands in question. Consequently, the requirement of pre-deposit was waived until the final disposal of the appeal, and the miscellaneous application for an early hearing of the stay application was disposed of accordingly.