2014 (2) TMI 1010 - AT - Central Excise

Waiver of pre deposit - Availment of CENVAT Credit - manufacture of computers system and is also engaged in the trading - input services i.e Management, maintenance and repair service, software services - Held that - In respect of the credit attributable to the trading activity, we do not find any merit in the submissions of the learned counsel for the applicant because the applicant should not have taken or at least reversed it on his own. There is no submission that they have made any reversal either at Bangalore or Pondicherry. The matter under consideration is credit taken at Pondicherry. So it is appropriate that the portion attributable to trading is ordered to be reversed immediately. Therefore, we order the applicant to make a pre-deposit of Rs.1.7 crores in respect of Appeal - Conditional stay granted.

Summary

Issues:
1. Accumulation and transfer of CENVAT credit from Bangalore to Pondicherry.
2. Dispute regarding the eligibility of the credit, including trading activity, documentation requirements, and nexus with manufacturing activity.

Analysis:
1. The applicant, engaged in manufacturing and trading of computer systems and services, accumulated CENVAT credit in Bangalore and transferred Rs.4.12 crores to Pondicherry as an input service distributor. The Revenue raised concerns over the credit division between trading and manufacturing activities, leading to two separate Show Cause Notices. The dispute primarily revolves around the credit taken at Pondicherry, with objections on credit attribution and documentation compliance.

2. The applicant argued that the exclusion of trading-related credit was done in Bangalore before the transfer, although this was not communicated to the Revenue initially. The Commissioner's decision to reverse a portion of the credit was based on the assumption that trading-related credit was included in the transfer. The applicant also faced challenges regarding incomplete documentation for credit transfer as per Rule 4A and the nexus of input services with manufacturing activity.

3. The Revenue contended that a significant portion of the transferred credit was related to trading, urging for its full reversal. Additionally, they emphasized the necessity of complete documentation for credit verification and invoked the burden on the assessee to ensure proper CENVAT credit compliance, citing the Maruti Suzuki Ltd. case.

4. The Tribunal ruled that the applicant must pre-deposit Rs.1.7 crores for the credit attributable to trading activity in Pondicherry. However, for the issue of incomplete documentation and nexus of input services, the Tribunal found these to be curable defects and deferred a decision until the final hearing. Notably, the Tribunal referenced the Ultra Tech Cements Ltd. case from the Mumbai High Court to support the argument on input services' nexus with manufacturing.

5. The final directive required the applicant to make a pre-deposit of Rs.1.74 crores within a specified timeline, with the remaining adjudged dues waived for appeal admission. The stay on collection of dues was granted until the appeal's disposal, with a compliance deadline set for August 30, 2013.