2013 (12) TMI 324 - AT - Service Tax

Waiver of pre-deposit - Stay of recovery - Demand of service tax - Denial of Cenvat credit on Employees Group Health Insurance Service and Construction Service - Nexus between output services and input service - Held that - Commercial Coaching and Training Centre was not exclusively used for rendering output services during the material period. It was as well used as in-house mechanism for training the new recruits of the company - in the context of determining penal liability of the appellant under Section 78 of the Finance Act, 1994, the adjudicating authority recorded a finding to the effect that the ingredients for such a penalty under Section 78 did not exist in the case. There is no independent finding in the impugned order with reference to the proviso to the Section 73(1) of the Act. Prima facie, ingredients for a penalty under Section 78 and for invoking the extended period of limitation under the proviso to Section 73(1) being identical, the learned counsel has made out a case against the demand of duty for the extended period - Assessee directed to make a pre deposit - Partial stay granted.

Issues:
Waiver of pre-deposit and stay of recovery in relation to Service Tax demand for the period April 2006 to March 2009, denial of Cenvat credit on Employees Group Health Insurance Service, denial of Cenvat credit on Construction Service, invokability of the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994.

Analysis:

1. Denial of Cenvat Credit on Employees Group Health Insurance Service:
The appellant sought waiver of pre-deposit and stay of recovery regarding a Service Tax demand arising from the denial of Cenvat credit on Employees Group Health Insurance Service. The appellant argued that they were entitled to avail Cenvat credit on this service as an 'input service.' Reference was made to a Tribunal decision and a High Court decision supporting their claim. The Tribunal found merit in the appellant's case against this demand, citing the case law favoring the appellant.

2. Denial of Cenvat Credit on Construction Service:
Regarding the denial of Cenvat credit on Construction Service used for setting up a Commercial Training and Coaching Centre, the appellant argued that this service fell within the definition of 'input service' under the Cenvat Credit Rules, 2004. The appellant contended that the Construction Service was utilized in relation to rendering Commercial Training and Coaching Services, for which they were registered with the department. However, the Tribunal noted that the appellant had not yet established a prima facie case on merit for this issue.

3. Extended Period of Limitation Invokability:
The appellant also contended that the extended period of limitation was not applicable in their case. They argued that even in the worst case scenario, they would only be liable to pay a significantly lower amount within the normal period of limitation. The Tribunal observed that the appellant had made a prima facie case on the limitation issue, citing certain findings by the Commissioner regarding the absence of ingredients for penalty under Section 78 of the Finance Act, 1994. The Tribunal found similarities between the ingredients for penalty under Section 78 and invoking the extended period of limitation, supporting the appellant's case against the demand for the extended period.

4. Overall Decision and Direction:
After considering all aspects, the Tribunal directed the appellant to pre-deposit a specified amount within a given period. Upon compliance, there would be a waiver of pre-deposit and stay of recovery for the remaining balance. The Tribunal highlighted the importance of compliance and set a deadline for reporting back on the matter.

This detailed analysis of the judgment addresses the issues of waiver of pre-deposit, denial of Cenvat credit on specific services, invokability of the extended period of limitation, and the overall decision and direction provided by the Appellate Tribunal CESTAT BANGALORE.

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