2009 (8) TMI 652 - AT - Service Tax

Stay-pre-deposit- The demands as indicated herein above has arisen on the ground that the applicant has collected the service tax from his purchasers of fiats discharged the service tax liability partly by utilising the credit of the service tax paid on the input services by his sub-contractors and partly by paying the amount in cash. It is the revenue s case that the applicant need not discharge the service tax liability and if that be so, the amount of credit taken by him on the service tax paid by his service provider is ineligible as service tax to him. Service tax before the issuance of Show Cause Notice. Held that- precedent decisions holding credit if eligible, not deniable once tax liability discharge. Output service considered taxable by appellant and hence eligible to take credit. Pre deposit waived.

Summary

Issues:
1. Waiver of pre-deposit of service tax, disallowance of Cenvat credit, penalties under various sections of the Finance Act.
2. Eligibility of applicant to avail Cenvat credit on service tax paid by service provider and utilization for service tax liability.
3. Liability of applicant to pay service tax on recipient of services for a specific period.

Analysis:
1. The applicant sought a waiver of pre-deposit for significant amounts including service tax, disallowance of Cenvat credit, and penalties under different sections of the Finance Act. The revenue contended that the applicant should not discharge the service tax liability, making the credit taken on service tax paid by service providers ineligible. Additionally, a specific amount was in dispute regarding service tax on services received before a particular date. The applicant argued that they had already discharged the service tax liability on purchased items by paying in cash and utilizing service tax credit. They also claimed that the service tax liability on the recipient of services was taxable only from a later date. The revenue argued against the applicant's liability to pay service tax, suggesting that the credit taken on input services should not be allowed.

2. The Tribunal analyzed the submissions and records to determine the applicant's eligibility to avail Cenvat credit on service tax paid by the service provider and its utilization for discharging service tax liability. Despite the revenue's dispute over the applicant's liability to pay service tax, the Tribunal noted that the applicant had already discharged the service tax liability before any show cause notice was issued. The Tribunal found that once the tax liability was discharged, the credit, if eligible, should not be denied. Since the applicant considered their output services as taxable, they were deemed eligible to take credit. Regarding the specific amount in dispute, the Tribunal accepted the argument that the liability to pay service tax on the recipient of services only applied from a later date, thus ruling in favor of the applicant.

3. In conclusion, the Tribunal found that the applicant had made a prima facie case for the waiver of the pre-deposit amounts involved. Therefore, the application for waiver was allowed, and the recovery of the amounts was stayed pending the appeal's disposal. The Tribunal's decision was pronounced and dictated in open court by the respective members.