2015 (2) TMI 523 - AT - Service Tax

Waiver of predeposit of CENVAT credit - Capital goods - adjudicating authority has confirmed the demand on ineligible credit on capital goods as well as on input services utilized in various activities and for construction of rest room in the railway yard - Held that - applicants have used rails, dust separation system, tyre cleaning system etc. in the railway yard. The applicants have also availed input service credit on the construction service for the construction of railway rest room at railway yard. - all the capital goods are installed and used in the railway yard for handling and transportation of coal from the railway yard to the captive power plant. The Hon'ble High Court of Rajasthan in the case of Aditya Cements (2007 (3) TMI 190 - HIGH COURT RAJASTHAN) held that use of materials in the railway track are essential for transporting fuel for manufacture of final product in the plant. As regards the input service, I find that the applicants have availed input service tax of construction service used in the construction of rest rooms in the railway yard which has no nexus to the manufacture of excisable goods. The case law relied by the applicants are not applicable to the present case. Prima facie, the applicants have not made out a prima facie case for waiver of predeposit of entire dues in respect of demand on input service credit. - Partial stay granted.

Summary

Issues:
Application for waiver of predeposit of CENVAT credit on capital goods and input services.

Analysis:
The applicants sought waiver of predeposit of CENVAT credit amounting to Rs. 14,27,334/- on capital goods and Rs. 22,26,305/- on input services, along with interest and penalty. The case involved availing CENVAT credit on ineligible capital goods used in the railway yard and input services for constructing rest rooms outside the factory premises. The adjudicating authority upheld the demand, interest, and penalty, a decision affirmed by the Commissioner (Appeals).

The counsel for the applicants argued that the capital goods were integral to the manufacture of power in the captive power plant, subsequently used in the production of final products. Additionally, he contended that the construction of rest rooms in the railway yard was essential. The counsel cited various precedents to support their arguments. Conversely, the Revenue's representative contended that the capital goods were used in a railway yard shared with others and that the construction of rest rooms did not directly relate to the manufacturing process. The Revenue relied on specific case laws to counter the applicant's claims.

After hearing both sides and examining the records, it was noted that the applicants utilized various items in the railway yard and availed input service credit for constructing railway rest rooms. The Tribunal found that the capital goods were indeed used for coal transportation to the captive power plant, citing a relevant High Court judgment. However, concerning the input service credit for rest room construction, the Tribunal concluded that it lacked a direct connection to the manufacturing of excisable goods. The Tribunal determined that the applicants failed to establish a prima facie case for waiving the entire predeposit amount. Consequently, the Tribunal directed the applicants to predeposit Rs. 7,00,000/- within six weeks, with the balance dues' predeposit waived and recovery stayed during the appeal's pendency.