2014 (1) TMI 1007 - AT - Central Excise

Benefit of Notification No. 1/2011 and 2/2011 Concessional rate of duty - Waiver of pre-deposit Commission agent services - Held that - The services were obtained only in respect of Ammonia which is their intermediate product sold to outside parties - The balance ammonia was consumed by them captively Thus, the commission agent service tax credit stand availed in respect of ammonia sold to outside parties and not in respect of urea cleared in terms of Notification No. 1/2011. Notification No. 1/2011 debars taking of credit of inputs and input services in respect of goods covered under the notification - The appellants have produced on record the invoices showing charging of Service Tax by the commission agents for sale of ammonia and the credit availed by them only in respect of commission paid to the commission agents for sale of ammonia - the appellants has paid the service tax and commission to the commission agents for sale of urea but no service tax credit stand availed by them in respect of such service tax - Prima facie the appellants have made a case in their favour Pre-deposits waived till the disposal stay granted.

Summary

Issues:
Dispensing with the condition of pre-deposit of duty and penalty under Notifications No. 1/2011 and 2/2011 for the manufacture of urea.

Analysis:
The appellants, engaged in urea manufacturing, were exempted until 28-2-2011, after which it became dutiable under Notifications No. 1/2011 and 2/2011. Notification No. 1/2011 offered a concessional 1% rate if no input tax credit was availed for urea, while Notification No. 2/2011 set a 5% rate with Cenvat credit availability. The appellants availed the 1% duty rate in March 2011 under Notification No. 1/2011. The Commissioner initiated proceedings for a differential demand from March to July 2011, dropping the demand from April to July due to no Cenvat credit availed, but confirmed it for March 2011 citing input Service Tax credit for security and commission agent services.

The appellant's advocate argued that services availed in prior years but credited in March 2011 should not be considered. He highlighted Rule 6(5) exception for security services and clarified commission agent services were for ammonia, not urea under Notification No. 1/2011. The Revenue's representative contended lack of service segregation by the appellant.

Upon review, it was noted that Notification No. 1/2011 prohibited input credit for goods under it. The commission agent service tax credit was only for ammonia sales, not urea under Notification No. 1/2011. Invoices proved service tax and commission for ammonia sales, with no credit taken for urea sales. Thus, the appellants were found to have a strong case on merits. Consequently, the pre-deposit condition of duty and penalty was waived, and the stay petitions were granted unconditionally.