CESTAT waives service tax credit demand for Aluminium manufacturer, finds strong case for reversal

The Appellate Tribunal CESTAT NEW DELHI waived the pre-deposit of service tax credit demand of Rs. 3,90,882/- and penalty of Rs. 10,000/- confirmed against the appellant, engaged in manufacturing Aluminium Bricks and Refractory material. The Tribunal found a strong prima facie case in favor of the appellant, as a portion of the demand had already been reversed, and the remaining amount was for legitimate input services. Consequently, the Tribunal allowed the stay petition, waiving the balance amount of the service tax credit and penalty confirmed.

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Issues involved: Application for waiver of pre-deposit of service tax credit demand and penalty imposed, confirmation of service tax credit demand, availability of Cenvat credit, time bar on demand.

Summary:
The Appellate Tribunal CESTAT NEW DELHI considered an application for waiver of pre-deposit of service tax credit demand of Rs. 3,90,882/- and penalty of Rs. 10,000/- confirmed against the appellant. The demand was based on the appellant taking service tax credit on inadmissible services. The appellant, engaged in manufacturing Aluminium Bricks and Refractory material, had taken Cenvat credit for various input goods and services used in their manufacturing process. The Assistant Commissioner confirmed the demand and penalty, which was upheld by the CCE (Appeals). The appellant filed an appeal along with a stay petition challenging the decision.

The appellant's counsel argued that a portion of the demand had already been reversed, and the remaining amount was for services such as insurance, civil construction, repairing of pipes, and industrial cleaning, for which Cenvat credit was available. It was also contended that the demand related to periods for which the show cause notice was issued in 2007, and since then, the appellant had been regularly filing returns, indicating no suppression and potential time bar on the demand. The appellant sought waiver of the balance amount and penalty, claiming a strong prima facie case.

The Departmental Representative reiterated the findings in the impugned order, emphasizing that the insurance policy included the residential colony, making the credit unavailable, and disputed the time bar on the demand.

After hearing both sides, the Tribunal observed that a portion of the credit had already been reversed by the appellant. The remaining amount in dispute appeared to be for legitimate input services. Considering the period of the demand and the appellant's compliance with filing returns, the Tribunal found a strong prima facie case in favor of the appellant. Consequently, the Tribunal waived the pre-deposit of the balance amount of the service tax credit and penalty confirmed, allowing the stay petition.

(Separate Judgement not delivered)

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