2012 (3) TMI 269 - AT - Service Tax

waiver of pre-deposit along with interest and penalty under Section 76 - applicants are registered under the category of Commercial or Industrial Construction Services and filing their ST-3 return periodically by availing the benefit of Notification No. 15/2004 dated 10.9.2004 upto 1.3.2006 and thereafter Notification No. 1/2006 dated 1.3.2006 - the Notification No. 1/2006 which was effected from 1.3.2006 provided for exemption from payment of Service Tax to the value which is in excess of 33% of the gross amount with the condition that service provider shall not avail CENVAT Credit of excise duty paid on inputs and capital goods and Service Tax paid on input services - it is contended that the credit availed by the applicants after 1.3.2006 pertains to the input services received prior to 1.3.2006 and they have not availed any credit for input services received after 1.3.2006 - Held that - When these input services were received by the applicant, there was no bar for availment of CENVAT Credit and has paid the amount for input services received by them prior to 1.3.2006 after introduction of the Notification No. 1/2006, therefore, they are entitled for CENVAT Credit - inputs services and utilize the same - it is undisputed that the applicant had taken Cenvat credit of the service tax paid on inputs, services, which was received by them prior to 1-3-2006 but the payment thereof were made subsequently i.e., 1-3-2006 and said credit was utilized by them for discharging the service tax liability on the services rendered by them prior to 1-3-2006 - in view of the fact that the applicant has already reversed the amount of Cenvat credit of the service tax on the inputs services, they have made out a prima facie case for the waiver of pre-deposit of the amount involved - decided in favour of assessee.

Summary

Issues:
Waiver of pre-deposit under Section 76 of the Finance Act, 1994 for Service Tax demands based on Notification No. 1/2006; Interpretation of conditions for availing exemption under the notification; Consideration of CENVAT Credit availed by the applicants before and after the introduction of Notification No. 1/2006.

Analysis:
The case involved the applicants seeking waiver of pre-deposit of a significant amount along with interest and penalty under Section 76 of the Finance Act, 1994, related to Service Tax demands based on Notification No. 1/2006. The Tribunal had earlier directed a pre-deposit in the first round of litigation, which was challenged and set aside by the High Court, leading to the current application for waiver before the Tribunal.

The crux of the case revolved around the interpretation of the conditions for availing exemption under Notification No. 1/2006. The applicants, registered under "Commercial or Industrial Construction Services," had availed CENVAT Credit, which led to the denial of exemption as per the notification. The dispute arose from the timing of availing the credit in relation to the introduction of the notification and the subsequent demands raised based on this issue.

The Tribunal considered the arguments presented by both sides in detail. The applicants contended that the credit availed pertained to input services received before the introduction of Notification No. 1/2006, thus justifying their claim for exemption. They relied on a previous Tribunal decision for unconditional waiver of pre-deposit in a similar case, emphasizing the payment for input services received prior to the notification.

On the other hand, the Commissioner strongly opposed the stay application, citing the violation of the notification conditions due to the applicants availing credit and exemption simultaneously. The Commissioner argued that the benefit of the notification should be interpreted strictly, referring to various judicial decisions to support the contention that the applicants should make a pre-deposit.

After analyzing the submissions, the Tribunal found merit in the applicants' claim that they were entitled to CENVAT Credit for input services received before the introduction of Notification No. 1/2006. Relying on a previous Tribunal decision, the Tribunal granted waiver of pre-deposit for the entire amount of Service Tax, interest, and penalty, staying the recovery during the pendency of the appeal. The decision was based on the lack of specific prohibition in the notification regarding the entitlement to CENVAT Credit for input services received before the notification's enforcement.

In conclusion, the Tribunal allowed the waiver of pre-deposit, emphasizing the applicants' prima facie case supported by the reversal of the CENVAT Credit amount and the absence of a clear prohibition in the notification regarding the credit for input services. The decision aligned with the interpretation of similar cases and granted relief to the applicants based on the specific circumstances and legal provisions involved.