2010 (5) TMI 230 - AT - Service Tax

Stay-Cenvat Credit- The appellant are engaged in the manufacture of steel castings chargeable to Central Excise Duty under Chapter heading 761699.90 of the Central Excise Tariff. They also avail Cenvat credit of duty paid on inputs and of service tax paid on input service used in or in relation to the manufacture of the finished products. Held that- tax paid by service recipient as deemed service provider and service used in relation to manufacture. Prima facie, Cenvat credit admissible. Thus appellant having strong prima facie case. Pre-deposit waived.

Summary

Issues:
Waiver from pre-deposit of Cenvat credit demand and stay on recovery till appeal disposal.

Analysis:
The appellant, engaged in manufacturing steel castings, availed Cenvat credit of service tax paid to foreign service providers under Section 66A of the Finance Act, 1994. The department alleged wrongful Cenvat credit availing and issued a show cause notice for recovery of Rs. 47,39,748/- along with interest and penalty. The Additional Commissioner dropped proceedings, but the Commissioner (Appeals) reversed the decision, confirming the demand. The appellant filed an appeal seeking waiver from pre-deposit and stay on recovery.

The appellant contended that as per Section 66A, they are deemed service providers in India for services received from foreign providers, making them eligible for Cenvat credit. The department argued against waiver, citing Rule 3(1)(ix) of the Cenvat Credit Rules, 2004, which does not explicitly mention service tax under Section 66A.

The Tribunal analyzed the legal provisions and held that the appellant, as a recipient of taxable services from foreign providers, paid service tax under Section 66A read with Rule 2(1)(d)(iv) of the Service Tax Rules, 1994. They deemed the appellant eligible for Cenvat credit as the service was used as input for manufacturing. Consequently, the Tribunal found a strong prima facie case in favor of the appellant and waived the pre-deposit of Cenvat credit demand and interest, staying recovery until appeal disposal.

In conclusion, the Tribunal granted the appellant's request for waiver and stay, emphasizing the correct application of Section 66A and the eligibility for Cenvat credit. The judgment provided relief to the appellant by allowing the appeal to proceed without the burden of immediate payment, ensuring a fair hearing of the case.