2014 (3) TMI 406 - AT - Service Tax

Waiver of pre deposit - Telecommunication service - Denial of CENVAT Credit - Revenue contends that applicant could not have availed CENVAT credit on any of the equipment in view of Rule 3(5) of CENVAT Credit Rules which required that the applicant should have reversed CENVAT credit on all capital goods removed from the premises of the assessee, if it is not returned within 180 days from the date of removal - Held that - since the provision in Rule 3(5) of the CENVAT Credit Rules, has been deleted the demand made for the reason that the goods have not been returned, is not sustainable at this stage. Therefore prima facie, we find it proper to grant waiver of pre-deposit of dues arising from the impugned order for admission of appeal and there shall be stay of collection of such dues during the pendency of the appeal - Stay granted.

Summary

Issues:
1. Availing CENVAT credit on certain goods claimed to be capital goods.
2. Interpretation of Rule 3(5) of CENVAT Credit Rules regarding reversal of credit on capital goods not returned within 180 days.
3. Adjudication of Show Cause Notice leading to confirmation of dues, interest, and penalty.
4. Appeal filed against the order and application for stay of proceedings.

Analysis:
1. The applicant, engaged in telecommunication services, availed CENVAT credit on goods like cables claimed as capital goods during Apr'05 to Sept. '07. The Revenue contended that CENVAT credit was not valid as per Rule 3(5) of CENVAT Credit Rules, requiring reversal of credit on capital goods not returned within 180 days.

2. The applicant argued that as per the definition of "capital goods" for a service provider, goods need not be received at the premises for credit, but should be used in providing services. The condition of goods returning within 180 days was crucial, but since this provision was deleted from 01.04.2008, any liability pre-dating this deletion should not apply. The applicant maintained that the goods were used for services, meeting the current requirement.

3. The Revenue opposed, citing Rule 3(5) of CENVAT Credit Rules during the relevant period mandating reversal of credit if capital goods were not returned within 180 days. The demand was supported by a reference to a prior case. The applicant contended that they utilized the goods for services, eliminating the need for return within 180 days, and argued that the demand was time-barred.

4. The Tribunal observed that since the provision in Rule 3(5) had been deleted, the demand based on goods not being returned was not sustainable. Consequently, the Tribunal granted a waiver of pre-deposit for the dues from the impugned order, allowing the appeal and staying the collection of dues during the appeal's pendency.