2015 (12) TMI 158 - AT - Service Tax

Waiver of pre deposit - Disallowance of CENVAT Credit - conversion from a 100% EOU to DTA unit - Held that - From the facts and circumstances of this case it is observed that services availed by a 100% EOU were eligible for getting refund of service taxes paid under Notification No. 41/2007-S.T., dated 6-1-2007. Similarly under Rule 10 of the Cenvat Credit Rules, 2004 provisions exist for transferring the Cenvat credit to the new unit on sale merger, amalgamation, transfer, etc. Appellant has rightly relied upon the case law of Showa India (P) Limited v. CCE, Faridabad (2011 (7) TMI 909 - CESTAT, DELHI) where credit of services availed before obtaining registration has been held to be admissible. Prima facie, appellant has made out a case for complete waiver of the confirmed dues and penalty, in view of the relied upon case laws. Accordingly, it is ordered that there will be a stay on the recoveries of the dues till the disposal of this appeal. - Stay granted.

Summary

Issues:
1. Stay application against OIA confirming disallowance of Cenvat credit, interest, and penalty.
2. Whether Cenvat credit of services availed during the period of 100% EOU can be taken after conversion to DTA unit.

Analysis:
1. The stay application was filed against the Order-in-Appeal (OIA) confirming the disallowance of Cenvat credit, interest, and penalty imposed by the adjudicating authority. The issue was whether the appellant, previously a 100% EOU named M/s. Covalence Adhesive Pvt. Limited, could claim Cenvat credit after converting to a DTA unit named M/s. Berry Plastics Pvt. Limited, Vadodara (now M/s. Seal For Life India Pvt. Limited, Vadodara).

2. The appellant's advocate argued that as the credit was for the period when the appellant was a 100% EOU, it could have obtained a cash refund for services availed before conversion under Notification No. 41/2007-S.T. The advocate contended that taking Cenvat credit post-conversion was a revenue-neutral exercise allowed under Rule 10 of the Cenvat Credit Rules, 2004. Additionally, the advocate claimed that Cenvat credit for CHA services and Cargo handling services related to export was permissible, citing various case laws to support the argument.

3. On the other hand, the Revenue's representative contended that credit for services availed before obtaining Central Excise Registration should not be allowed, supporting the decisions of the lower authorities.

4. After hearing both sides and examining the case records, the Tribunal noted that services availed by a 100% EOU were eligible for service tax refunds under Notification No. 41/2007-S.T. Furthermore, Rule 10 of the Cenvat Credit Rules, 2004 allowed for transferring Cenvat credit to a new unit in cases of sale, merger, or transfer. The Tribunal referred to the case law of Showa India (P) Limited v. CCE, Faridabad, where credit for services availed before registration was deemed admissible. Consequently, the Tribunal found merit in the appellant's case for a complete waiver of confirmed dues and penalties based on the cited case laws, ordering a stay on recoveries until the appeal's disposal.