2010 (12) TMI 549 - AT - Central Excise

Appellate Tribunal grants waiver for service tax on manufacturing exempted goods

The Appellate Tribunal CESTAT, CHENNAI, granted the waiver of pre-deposit for service tax on manufacturing exempted goods and invoices not in the plant's ... Waiver of pre-deposit - prima facie case test for grant of pre-deposit waiver - cenvat credit and inputs used in manufacture of exempted goods - procedural infirmity of invoicing - pre-deposit stay of recovery - limitations on raising new grounds not mentioned in the Show Cause NoticeWaiver of pre-deposit - prima facie case test for grant of pre-deposit waiver - cenvat credit and inputs used in manufacture of exempted goods - pre-deposit stay of recovery - limitations on raising new grounds not mentioned in the Show Cause Notice - Application for waiver of pre-deposit of confirmed service tax demand. - HELD THAT: - The Tribunal found that a prima facie case for waiver had been made out. The digging of pits at the assessee's plant for dumping waste generated in the course of manufacture of the final product, 'Denatured Ethyl Alcohol', related to the business of manufacture of that final product. That the waste decomposes into biogas subsequently used in producing an exempted commodity ('Bio-compost fertilizer') did not, on the material before the Tribunal, negate the connection of the service to the manufacture of the taxable final product. The Revenue's reliance upon Rule 6(1) of the Cenvat Credit Rules, 2004, to contend that credit is not allowable for inputs used in manufacture of exempted goods was not a determinative answer on the merits because that ground was not taken in the Show Cause Notice; the Tribunal treated raising of that ground at this stage as impermissible for deciding the waiver application. In these circumstances, and having treated the alternative contention regarding invoicing as only a procedural lapse (see next issue), the Tribunal exercised its discretion to grant waiver and stay recovery during the pendency of the appeal. [Paras 2]Pre-deposit of the demand waived and recovery stayed during the pendency of the appeal.Procedural infirmity of invoicing - cenvat credit and inputs used in manufacture of exempted goods - Effect of invoices being in the name of the Head Office instead of the plant on the claim of credit. - HELD THAT: - The Tribunal treated the fact that invoices were in the name of the Head Office and not the plant as a prima facie procedural lapse. On the material placed for the waiver application, this procedural irregularity was not viewed as a ground for denial of credit at the stage of deciding waiver; it was characterised as a curable or procedural defect which, prima facie, did not justify refusal of the waiver sought. [Paras 2]Invoicing irregularity regarded as a procedural lapse only and not a basis to deny waiver of pre-deposit.Final Conclusion: Waiver of the pre-deposit was granted and recovery stayed pending appeal, on the Tribunal's conclusion that a prima facie case was made out and that the invoicing irregularity was a procedural lapse; the Revenue's new contention based on Rule 6(1) could not be allowed to defeat the waiver where it was not raised in the Show Cause Notice. Issues: Application for waiver of pre-deposit of service tax for manufacturing exempted goods and invoices not in the name of the plant.1. Waiver of Pre-deposit for Manufacturing Exempted Goods:The judgment addresses the application for waiver of pre-deposit of service tax amounting to Rs. 4,34,411/- confirmed for being used in the manufacture of exempted goods, specifically 'Bio-compost fertilizer.' The Tribunal acknowledges the submissions made, highlighting that the waste generated during the manufacturing process of 'Denatured Ethyl Alcohol' decomposes into Biogas, subsequently utilized in the production of Bio-compost fertilizer. Despite the exempted status of the final product, the Tribunal notes that the service in question is directly related to the business of manufacturing the assessee's primary product, Denatured Ethyl Alcohol. The Tribunal dismisses the Revenue's reliance on Rule 6(1) of the Cenvat Credit Rules, 2004, emphasizing that the ground was not part of the initial Show Cause Notice. Consequently, the Tribunal grants the waiver of pre-deposit, citing the procedural lapse as a reason for not denying the credit.2. Invoices Not in the Name of the Plant:The second issue pertains to the invoices being in the name of the Head Office rather than the plant. The Tribunal deems this discrepancy as a procedural lapse, indicating that such an error does not warrant the denial of credit. Despite the oversight in the invoicing process, the Tribunal finds that it does not impact the eligibility for the waiver of pre-deposit. As a result, the Tribunal grants the waiver of the disputed amounts and orders the stay of recovery during the pendency of the appeal.In conclusion, the judgment by the Appellate Tribunal CESTAT, CHENNAI, delivered by Ms. Jyoti Balasundaram, addresses the issues of waiver of pre-deposit concerning service tax for manufacturing exempted goods and the discrepancy in invoices not being in the name of the plant. The Tribunal grants the waiver based on the direct relation of the service to the manufacturing process, dismissing the Revenue's reliance on a rule not mentioned in the Show Cause Notice. Additionally, the Tribunal overlooks the procedural lapse regarding the invoicing discrepancy, emphasizing that it does not affect the grant of the waiver.