2014 (2) TMI 694 - AT - Service Tax

Availment of CENVAT Credit - Department was of the view that to the extent the Cenvat credit availed input services have been used in respect of trading activity, they would not be eligible for the Cenvat credit - Imposition of interest and equivalent penalty - Held that - input services, in question, have been used in or in relation to providing the taxable output services authorised service station service and business auxiliary service and also trading activity, which was not a taxable service during the period of dispute - appellant have not been able to establish prima facie case in their favour - Conditional stay granted.

Summary

Issues:
Cenvat credit eligibility for input services used in trading activity, proportionate denial of credit, limitation period for demand, requirement of pre-deposit for hearing the appeal.

Analysis:
The appellant, an authorized service station providing taxable services, availed Cenvat credit on various input services during the disputed period. The dispute arose as the department contended that Cenvat credit for input services used in trading activity was not eligible. The Assistant Commissioner confirmed a Cenvat credit demand of Rs. 3,61,760 along with interest and penalty. On appeal, the Commissioner (Appeals) upheld the decision. The appellant argued that trading activity was not considered an exempted service during the disputed period and relied on a judgment from the Delhi High Court. They also claimed that a substantial portion of the demand was time-barred. The department opposed the stay application, stating that Cenvat credit for input services used in trading activity was not permissible, even before trading activity was considered a taxable service. The department also argued that the denial of Cenvat credit was proportionate to the input services used for trading activity. The appellant failed to establish a prima facie case, leading to a direction to deposit Rs. 2,50,000 within four weeks for the appeal to be heard without pre-deposit of the remaining amount.

This judgment primarily deals with the eligibility of Cenvat credit for input services used in both taxable services and trading activity. The appellant's argument that trading activity was not an exempted service during the disputed period was considered, but the Tribunal found that the denial of Cenvat credit was limited to input services used for trading activity. The Tribunal differentiated this case from the cited Delhi High Court judgment, emphasizing the proportionate denial of credit for trading activity. The issue of limitation was also raised, with the department invoking the longer limitation period due to the appellant's alleged suppression of facts. The Tribunal directed the appellant to deposit a specified amount to proceed with the appeal, as they failed to establish a prima facie case in their favor. Compliance was required within a set timeline for the appeal to proceed without the pre-deposit of the remaining amount.