2014 (10) TMI 605 - AT - Service Tax

Waiver of pre deposit - Information Technology services - service consumed in SEZ - Held that - In the case of Adani Power Ltd. (2014 (1) TMI 200 - CESTAT AHMEDABAD), unconditional stay was granted on the ground that the Notification No.4/2004-ST dt. 31.3.2004 specifically extended to the consumption of taxable service of any description to a developer of Special Economic Zone or any unit in any Special Economic Zone for consumption of the services within such Special Economic Zone. The other issues would be examined in detail at the time of appeal hearing - deposit of ₹ 14.53 lakhs is sufficient for waiver of predeposit of balance amount of tax along with interest and penalty. Accordingly, predeposit of balance amount of tax along with interest and penalty would be waived and recovery be stayed till disposal of appeal - Stay granted.

Summary

Issues:
1. Application for waiver of pre-deposit of tax of Rs. 26,54,01,845/- along with interest and penalty for the period March 2009 to September 2009.
2. Demand under reverse charge mechanism for Information Technology services from Microsoft Corporation intended for SEZ unit.
3. Sustainability of demand for services consumed in SEZ.
4. Demand on ineligible cenvat credit and related to consumption of BPO unit.
5. Adequacy of deposit made by the applicant.

Analysis:
1. The applicant sought a waiver of pre-deposit of a substantial tax amount along with interest and penalty for a specific period. The advocate argued against the demand under reverse charge mechanism, citing a case where a similar demand was stayed by the Tribunal for services consumed within a Special Economic Zone (SEZ).

2. The advocate contended that the demand for services received from Microsoft Corporation under reverse charge mechanism was not sustainable as they were acting as a large account reseller facilitating price negotiations, not directly receiving IT services. The advocate also highlighted a Supreme Court decision to support the argument that the demand for services rendered before a certain date was not justified.

3. The advocate further argued against the demand related to ineligible cenvat credit and consumption by the BPO unit, referencing a previous order by the Commissioner of Central Excise that dropped a similar demand. It was emphasized that a significant sum had already been deposited by the applicant, duly recorded in the adjudication order.

4. The Revenue representative countered the applicant's claims, asserting that evidence indicated the receipt of IT services from Microsoft Corporation, making them liable under the reverse charge mechanism. The role of the applicant as a large account reseller was interpreted to fall within the definition of IT services received from Microsoft Corporation for the SEZ unit.

5. The Tribunal reviewed the arguments and previous decisions, particularly focusing on a case where an unconditional stay was granted due to specific provisions related to consumption of services within an SEZ. Ultimately, the Tribunal found the deposit made by the applicant sufficient for waiving the pre-deposit of the balance tax amount, interest, and penalty, allowing a stay on recovery until the appeal's disposal.