By TIOL News Service

MUMBAI, OCT 15, 2013: THE appellants are manufacturers of hot briquetted iron and sponge iron. They had taken CENVAT Credit of Rs.1,32,807/- being the service tax paid on handling of steam coal. The appellant had also taken credit of the ST paid on the “Port Services” [of Rs.17,10,141/-] for the period prior to 10/09/2004 and which was allegedly lying unutilized in their books of accounts. Purporting that the same was a credit earned under the earlier CCR, the appellant took credit of the said amount as per Rule 11 of CCR, 2004 when the scope of availment of CENVAT credit in respect of service tax paid on “input service” was expanded to cover manufacturers and output service providers.

The department objected to the availment of the credits and issued a SCN which was decided against the assessee.

The lower authority also rejected their appeal and so the appellant is before the CESTAT.

While not contesting the demand of CENVAT Credit availed of Rs.1,32,807/-, it was submitted that as regards the credit of Rs.17,10,141/- the same was earned and lying unutilized prior to 10/09/2004; that when the appeal was being considered by the lower appellate authority they were directed to make a pre-deposit of 50% of the CENVAT Credit wrongly availed and also 50% of the penalty imposed and which they have done and, therefore, the same be considered sufficient for considering the stay application.

The Revenue representative submitted that the appellants were not eligible for the CENVAT Credit of Rs.17,10,141/- as they were not out put service providers prior to 10/09/2004 and only output service providers were eligible for availing any credit prior to 10/09/2004; that the appellant be put to terms.

The Bench observed -

“6.2 As regards the availment of CENVAT Credit of Rs.17,10,141/- prior to 10.09.2004 only output service providers were eligible for taking input service credit. With effect from 10/09/2004, these restrictions were removed and service tax credit was made available to manufacturers to excisable goods also. It is an admitted fact that prior to 10/09/2004 the appellant was not registered as an output service provider. If that be so, the question of availing or taking any credit in respect of input service received prior to 10/09/2004 would not arise abinitio. Therefore, the department is correct in denying the CENVAT Credit availed. What could have been carried forward under Rule 11 of the CENVAT Credit Rules, 2004 is the CENVAT credit earned by them. Inasmuch as the appellant was not an output service provider prior to 10/09/2004, the question of earning any CENVAT credit of input service tax may not arise. Therefore, prima facie department has a case in their favour. However, considering that the appellant has already made a pre-deposit of 50% of the service tax confirmed against them and also 50% of the penalty imposed on them, which would otherwise work out to 100% of the service tax and the same is sufficient for hearing of the appeal, I grant waiver from pre-deposit of the balance of dues adjudged against the appellant and stay recovery during the pendency of the appeal.”

In passing: We will keep you posted. Also see 2013-TIOL-1499-CESTAT-MUM & 2013-TIOL-1500-CESTAT-MUM.

(See 2013-TIOL-1517-CESTAT-MUM)