2009 (11) TMI 455 - AT - Service Tax

Stay Cenvat Credit Cedit availed in relation to service utilized in respect of exempted as well non-exempted product. Separate account not maintainable. Demand of amount of 8% assailed submitting that credit in relation to exempted product reversed subsequently. Held that prima facie demand of 8% amount not avoidable. Prima facie no case for total waiver. Pre deposit directed in installment.

Summary

Issues:
1. Challenge to the Order passed by the Commissioner, Indore confirming demand under Cenvat Credit Rules, 2004.
2. Time-barred demand for the period prior to the issuance of the show cause notice.
3. Error in confirming a huge demand amount.
4. Reversal of credit availed for exempted products.
5. Invocation of the extended period of limitation.
6. Calculation of the recoverable amount under the impugned order.
7. Waiver of interest and penalty amount.

Analysis:

1. The appellant challenged the Order confirming a demand of Rs. 1,69,24,709 under Cenvat Credit Rules, 2004, along with interest and penalties. The appellant argued that the credit availed in relation to services rendered was reversed during the relevant period, questioning the justification for the confirmed amount. The demand related to the period from Jan. 2005 to March 2008, with the show cause notice issued on 7th August 2008, suggesting the demand for the period prior to one year of the notice was time-barred. The appellant contended that the authorities erred in confirming a substantial amount exceeding Rs. 1.00 Crore.

2. The respondent argued that the reversal of credit after utilization does not benefit the appellant, citing a Tribunal decision and Rule 6(2) of the Cenvat Credit Rules, 2004. Regarding the extended period of limitation, the respondent asserted that the correspondence did not disclose facts justifying the invocation of the extended period. The Commissioner observed that the correspondence did not reveal the lack of separate accounts for credit availed for exempted and non-exempted products, supporting the invocation of the extended period.

3. The Tribunal found that the appellant had availed credit for services used in both exempted and non-exempted products without maintaining separate accounts. The reversal of credit after utilization was not considered a valid defense according to judicial precedents. The Tribunal noted that the correspondence did not disclose the lack of separate accounts or the extent of credit utilization, supporting the Commissioner's findings.

4. The calculation of the recoverable amount under the impugned order was found to be in accordance with the law. The Tribunal concluded that the appellant failed to establish a prima facie case for a total waiver of the demand. However, considering various contentions raised, the Tribunal decided to waive the interest and penalty amount imposed under the order.

5. The Tribunal partially allowed the application, staying the penalty and interest amount pending appeal disposal. The appellant was directed to deposit the demand amount of Rs. 1,69,24,709 in four installments at six-week intervals. The compliance report for the first two installments was scheduled for a specific date.