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2014 (2) TMI 199 - AT - Service TaxWaiver of pre-deposit of service tax - Availment of CENVAT Credit - Recovery of proportionate cenvat credit of GTA services involved on these iron ore fine and coal fine - Held that - Revenue claims that since the iron ores were sold as such without being used in the manufacture of products, proportionately the cenvat credit availed on GTA services for bringing iron ore to the factory were required to be reversed under Rule 3 (5) of Cenvat Credit Rules, 2004 - applicants are able to make out a prima-facie case for total waiver of duty and penalty, hence, pre-deposit of all dues adjudged is waived and its recovery stayed during pendency of the appeal - Following decisions of Commr. of Central Ex., Chandigarh I Vs. Punjab Steels 2010 (7) TMI 252 - PUNJAB AND HARYANA HIGH COURT and Chitrakoot Steel & Power Pvt. Ltd. Vs. Commr. of Central Excise, Chennai 2007 (11) TMI 135 - CESTAT, CHENNAI - Stay granted.
Issues: Application for waiver of pre-deposit of service tax and penalty; Interpretation of Cenvat Credit Rules regarding the treatment of iron ore fines generated during the manufacturing process.
Analysis: The case involved an application for the waiver of pre-deposit of service tax and penalty amounting to Rs.6,68,448/- imposed under Section 78 of the Finance Act, 1994. The applicants, engaged in the manufacture of sponge iron, had procured iron ore and coal for use in their factory premises between January 2005 to September 2008. The applicants had paid freight charges for transportation of these materials and availed cenvat credit on the service tax paid. However, a demand was raised for the recovery of proportionate cenvat credit of GTA services on iron ore fines and coal fines generated during the manufacturing process. The advocate for the applicants argued that the iron ore fines should not be considered as inputs removed but as waste generated during the manufacturing process, thus falling under the conditions of being used in or in relation to the manufacture of final products as per the Cenvat Credit Rules, 2004. The advocate cited relevant legal precedents to support this argument, including decisions from the Hon'ble Punjab & Haryana High Court and the Tribunal. The Revenue, represented by the ld. A.R., supported the findings of the ld. Commissioner (Appeals) regarding the treatment of iron ore fines generated during the manufacturing process. After hearing both sides and examining the records, the Tribunal found that the iron ores and coal procured by the applicants were indeed used in the manufacture of sponge iron, for which service tax on GTA services had been paid and cenvat credit availed. However, the Revenue contended that the iron ore fines, which were not used in the final product but sold in the market, required the reversal of the cenvat credit availed on GTA services under Rule 3 (5) of the Cenvat Credit Rules, 2004. The Tribunal noted the legal position established by the Hon'ble Punjab & Haryana High Court and the Tribunal in similar cases, where it was held that cenvat credit should not be reversed in such circumstances. Consequently, the Tribunal found that the applicants had made a prima facie case for the total waiver of duty and penalty, leading to the waiver of pre-deposit of all dues adjudged and the stay of recovery during the pendency of the appeal. The stay petition was allowed, and the decision was dictated and pronounced in the open Court.
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