2014 (1) TMI 1196 - AT - Service Tax

Waiver of pre-deposit of Service Tax - Electroplating/painting on the semi-finished goods - Notification No. 8/2005-S.T. - Availment of CENVAT Credit - Held that - no duty was being paid in respect of goods manufactured in terms of Notification No. 214/86, i.e., job work Notification, the final product cannot be held to be exempted so as to attract the provisions of erstwhile Rule 57CC - Following decision of Sterlite Industries India Ltd. 2004 (12) TMI 108 - CESTAT, MUMBAI - Stay granted.

Summary

Issues:
1. Whether the appellant is liable to pre-deposit Service Tax and penalty amounting to Rs. 50,74,588.
2. Whether the appellant's clearances under Notification No. 8/2005-S.T. can be considered exempted, impacting the utilization of Cenvat credit.

Analysis:
1. The appellant, engaged in electroplating/painting on goods sent by their principal, faced proceedings for non-payment of Service Tax on these processes. The Revenue argued the appellant provided both dutiable and exempted services, limiting Cenvat credit utilization to 20% under Rule 6. The appellant contended that clearances under Notification No. 8/2005-S.T. were not exempted, citing the Sterlite Industries case where duty-free goods under a job work Notification were not considered exempted. The Tribunal found the issue settled by the Larger Bench, holding that under similar notifications, final products are not exempted. Despite the authority's disregard for this precedent, the Tribunal granted an unconditional stay, allowing the appellant's plea.

2. The crucial issue revolved around whether the appellant's activities under Notification No. 8/2005-S.T. constituted exempted clearances affecting Cenvat credit utilization. The appellant argued for unconditional stay based on the Sterlite Industries case, which clarified that duty-free goods manufactured under specific notifications were not exempted. The Tribunal concurred, emphasizing the applicability of this ruling to the present case. The appellant's reliance on this precedent, ignored by the adjudicating authority, led the Tribunal to grant the stay petition, highlighting the consistent application of the Larger Bench's decision in similar matters. This decision underscores the importance of legal precedents in interpreting complex tax provisions and determining liability in tax disputes.