2014 (5) TMI 422 - AT - Service Tax

CENVAT Credit - service tax paid on banking and other financial services - Held that - The underlying principles in Circular dated 29-04-2011 are applicable with equal force for services for which total credit was available prior to 01-04-2011 but only proportionate credit is available after 01-04-2011. Therefore, we grant waiver of pre-deposit of dues arising from the impugned order for admission of appeal. Further, there shall be stay on collection of such dues during pendency of the appeal - Stay granted.

Summary

Issues:
1. Availing Cenvat credit on input services for banking and financial services.
2. Interpretation of Rule 6(5) and Rule 6(3A) of Cenvat Credit Rules, 2004.
3. Applicability of rules in force at the time of service receipt versus credit availing date.

Analysis:
1. The applicant, a manufacturer of excisable products, availed Cenvat credit on service tax paid for banking and financial services between 01-04-09 to 31-03-11, with the credit taken in September 2011. A show cause notice was issued by the Revenue, contending that post the deletion of Rule 6(5) from 01-04-2011, only proportionate credit for dutiable goods under Rule 6(3A) could be availed. A demand of Rs.88,84,632/- out of the total credit was confirmed, leading to an appeal by the applicant.

2. The crux of the argument lies in the interpretation of the Cenvat Credit Rules, specifically Rule 6(5) and Rule 6(3A). The applicant's advocate asserts that eligibility for credit should be determined based on the rules in force at the time of service receipt, not at the time of credit availing. He relies on a CBEC circular to support the claim that credit cannot be denied based on new rules. Conversely, the Revenue argues that the rules applicable at the time of credit availing should dictate eligibility, citing a different CBEC clarification regarding rent-a-cab services.

3. The Tribunal, after considering both sides' submissions, relies on the principles outlined in the Circular dated 29-04-2011. It concludes that these principles apply equally to situations where total credit was available pre-01-04-2011, but only partial credit post that date. Consequently, the Tribunal grants a waiver of pre-deposit for the dues arising from the impugned order for appeal admission. Additionally, a stay on the collection of such dues during the appeal's pendency is ordered, ensuring a fair process for the applicant.