2015 (12) TMI 746 - AT - Service Tax

Waive of pre deposit - CENVAT Credit - Consulting Engineer Services - Held that - When a manufacturer is producing dutiable in Consulting Engineer Services which the service on which Cenvat credit has been taken in this case is also included in the list of services contained in Rule 6(5) of CCR. Nowhere, there is a finding that appellant has used Consulting Engineer Services exclusively for manufacture of exempted goods or providing exempted services. The ground taken by the Revenue is that the appellant has entered into independent contract for supply of goods and services. Therefore, one of the grounds taken is that if the supply of goods is involved, credit proportionate to that extent is not admissible. However, Rule 6(5) of Cenvat Credit Rules, 2004 does not distinguish between the activities undertaken as part of composite contract or independent contracts. So long as an assessee is not undertaking manufacture of dutiable and exempted goods or providing taxable and exempted services, unless the credit is exclusively used for providing exempted services or manufactured goods credit cannot be denied in respect of services listed in Rule 6(5). This being the position, in the absence of any finding that services have been used exclusively in the manufacture of exempted goods or providing exempted services, credit cannot be denied in respect of services listed in Rule 6(5) of Cenvat Credit Rules. - appellant has made out a strong prima facie case for waiver and for stay against realization of dues. - Stay granted.

Summary

Issues:
1. Denial of Cenvat credit on Service Tax paid for leadership fee.
2. Applicability of Rule 6(5) of Cenvat Credit Rules, 2004.
3. Invocation of extended period for demand.

Analysis:
1. The appellant, involved in a consortium agreement for a project, paid a leadership fee under supplementary agreements and Service Tax under 'Consulting Engineer Services'. The show cause notice proposed denial of Cenvat credit on the ground that Service Tax on leadership fee for goods is not eligible. The appellant argued that trading was not an exempted service before 1-4-2011 and claimed benefit under Notification No. 12/2003-S.T. The Tribunal noted that Rule 6(5) of CCR allows credit unless exclusively used for exempted goods/services. As the appellant did not exclusively use services for exempted activities, credit cannot be denied under Rule 6(5).

2. The Tribunal emphasized that Rule 6(5) of Cenvat Credit Rules does not differentiate between activities in a composite or independent contract. As long as the appellant is not exclusively using credit for exempted activities, credit for services listed in Rule 6(5) cannot be denied. Since no finding indicated exclusive use of services for exempted activities, the Tribunal held that credit cannot be denied under Rule 6(5), supporting the appellant's claim for waiver and stay against realization of dues.

3. The Tribunal found that the appellant had a strong prima facie case for waiver and stay against dues realization. Consequently, the requirement of pre-deposit was waived, and a stay against recovery of the dues adjudged in the impugned order was granted during the appeal's pendency. The Tribunal's decision was pronounced and dictated in open court, ensuring relief for the appellant pending the appeal process.