2010 (3) TMI 397 - AT - Service Tax

Stay-pre-dispensation- The applicants are providers of Maintenance and Repair Services , who had taken service tax credit on input services such as Courier, Telephone, Advertisement, Travel Agent Service, Photography Service, Security Tour Operator Service, Mandap Keeper Service etc., during the period July 2003 to September 2004. The department alleged violation of Rule 4(2) & 4(3)(a) of Service Tax Rules, 1994. The Department was of the view that none of the services on which service tax credit had been taken could be treated as input services as they were not used in or in relation to the output service. Held that-prima facie case to total waiver on merits not made out. Documents or details with break up of input services not provided. Prima facie nature of services on which credit availed, suppressed. Prima facie larger period of limitation available. pre-deposit of rs. 50 lakhs directed to be made in cash.

Summary

Issues:
Application for waiver of pre-deposit of service tax, Mis-declaration of facts, Violation of Service Tax Rules, Input services usage, Time bar plea, Financial hardship plea, Pre-deposit amount determination, Compliance deadline.

Analysis:
The case involved an application for waiver of pre-deposit of service tax amounting to Rs. 2,39,34,843/- along with interest and penalty. The applicants, providers of 'Maintenance and Repair Services', had taken service tax credit on various input services during a specific period. The department alleged mis-declaration of facts and violation of Service Tax Rules due to the lack of centralized billing and accounting systems. The department also contended that the services on which tax credit was taken were not used in relation to the output service, invoking the extended period of limitation due to incomplete details provided by the assessees.

The assessees argued that the credit availed was related to input services provided by the Regional/Corporate office and were used in relation to the output service. However, the Tribunal found that the assessees failed to demonstrate that the services on which tax was paid and credit availed were actually used in rendering maintenance and repair services at their service centers. Consequently, the Tribunal did not find a prima facie case for total waiver based on the merits of the issue. Regarding the time bar plea, the Tribunal noted that the assessees did not provide detailed documents or break-ups of the input service credit availed, allowing the department a larger period of limitation due to prima facie suppression of service details.

Considering the facts and circumstances of the case, the Tribunal directed a pre-deposit of Rs. 50 lakhs within eight weeks, without considering the plea of financial hardship. The revenue's objection to freezing Cenvat credit or making debit entries for compliance was upheld. The pre-deposit amount was to be made in cash, and upon compliance, the remaining amounts including penalty would be waived with recovery stayed pending the appeal. Failure to comply would result in vacation of stay and dismissal of the appeal without prior notice. The compliance deadline was set for 24-5-2010, with an adjournment for the early hearing application to the same date.