2009 (5) TMI 334 - AT - Service Tax

Use of common inputs in providing taxable and exempted services - It is the assumption of the Revenue that the service rendered to J&K region would fall under exempt category. The ld. Chartered Accountant took pain to show that J & K region itself is outside the purview of the Act governing the service tax. - When this is the case the appellant would not come under the purview of Cenvat Credit Rule 6(3)(c) and there would not be any requirement for them to maintain separate account. Consequently the restriction of 20% credit will not be applicable. stay granted - The second demand relates to the denial of input service tax paid on the sales commission paid by them - The contracts include both sales as well as AMC. It is his contention that they cannot be vivi-sected and the denial of input service tax credit on the service tax paid on the sales commission is not justified. Prima facie, we are of the view that the appellants have a strong case in his favour. stay is granted

Summary

Issues:
1. Whether the appellants are required to pre-deposit specific amounts as per the impugned order.
2. Whether service tax is payable under the category of AMC service for supplying XBIS systems to various establishments, including Jammu and Kashmir clients.
3. Whether Rule 6(3)(c) of Cenvat Credit Rules applies to the service rendered to Jammu and Kashmir region.
4. Whether the denial of input service tax paid on sales commission is justified.

Analysis:
1. The appellants were directed to pre-deposit certain amounts as per the impugned order. The Department proceeded against them for service tax payment related to the supply of XBIS systems and AMC contracts. The first issue pertained to the service rendered to Jammu and Kashmir region. The Department argued that Rule 6(3)(c) of Cenvat Credit Rules applied, considering the service to Jammu and Kashmir as falling under the exempt category. However, it was clarified that Jammu and Kashmir region is outside the purview of the Act governing service tax, as stated in the findings of the Original authority. Consequently, the appellants were not required to maintain a separate account, and the restriction of 20% credit did not apply.

2. The second demand was related to the denial of input service tax paid on sales commission. The appellants contended that the sales and AMC contracts should not be separated, and the denial of input service tax credit on sales commission was unjustified. The Tribunal found merit in the appellants' argument, stating that they had a strong case in their favor. Therefore, the Tribunal ordered a waiver of the pre-deposit of the entire amount demanded in the impugned order until the appeal's disposal.

In conclusion, the Tribunal ruled in favor of the appellants, stating that they were not required to pre-deposit the amounts specified in the impugned order. The Tribunal also found that the denial of input service tax on sales commission was not justified, and hence, waived the pre-deposit until the appeal's final disposal.