2011 (2) TMI 56 - AT - Service Tax

Waiver of pre-deposit Cenvat credit of service tax - service of commercial or industrial construction covered by Section 65 (105) (zzq) of the Finance Act, 1994 availed for construction of buildings in the factory premises which house the manufacturing facilities and office premises of the factory - objection of the Department that the services, covered by Section 65 (105)(zzq) used for bringing into existence, factory buildings which is an immovable property on which no excise duty chargeable and, therefore, Cenvat credit not available - objection of the Department is not correct as the factory premises and office premises of the factory had been constructed by availing the services of commercial or residential construction service providers, for manufacture of excisable goods - requirement of pre-deposit of Cenvat credit demand, interest and penalty would cause undue hardship Stay granted

Summary

Issues:
Application for waiver from pre-deposit of Cenvat credit demand, interest, and penalty under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944. Stay on recovery till appeal disposal.

Analysis:
The appellant, engaged in manufacturing motorcycles and parts, availed construction services for factory buildings, leading to a Cenvat credit demand of Rs.1,15,81,957. The department contended that since the outcome was immovable property, not goods or services, the credit was inadmissible. A show-cause notice was issued, confirmed by the Commissioner, resulting in the present appeal and stay application.

The appellant's counsel argued that the credit was valid under Rule 6(5) of Cenvat Credit Rules, 2004, as the finished products were dutiable. The Departmental Representative opposed, citing Board Circular No. 98/1/08, stating immovable property does not attract excise duty or service tax, hence no credit. The appellant sought waiver based on a strong prima facie case.

The Tribunal analyzed the definition of 'input service' and Rule 6(5), finding the construction services for factory buildings fell within the definition. It noted that since dutiable goods were manufactured, the bar under Rule 6(5) did not apply. Disagreeing with the Department's objection, the Tribunal held that denying credit based on the immovable property outcome would render various services in Rule 6(5) inadmissible, contrary to the definition of 'input service'.

Considering the arguments and precedents, the Tribunal found merit in the appellant's case, waiving the pre-deposit requirement and staying recovery of Cenvat credit demand, interest, and penalty until appeal disposal. The decision was pronounced on 25.2.2011 by the Tribunal.