Court upholds CESTAT decision on depositing 35% disputed CENVAT credit pending appeal

The High Court upheld the CESTAT's decision, requiring the appellant to deposit 35% of the disputed CENVAT credit. The court clarified that this deposit was only a fraction of the total liability, pending appeal. The appeal was dismissed, emphasizing that the judgment's observations would not impact the case's merits during the final hearing at CESTAT.

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Issues:
1. Appeal against pre-deposit order/stay order under Section 35-G of the Central Excise Act, 1944.
2. Allegations of wrongly availed CENVAT credit on input services and inputs.
3. Disallowance of CENVAT credit and demand of service tax.
4. Difference of opinion on pre-deposit requirement for CENVAT credit on input services.
5. Interpretation of CENVAT credit rules for construction services.
6. Applicability of Andhra Pradesh High Court judgment on input credit.
7. Exclusion of input credit for construction goods under CENVAT Credit Rules 2004.

Analysis:
The appellant, a real estate company constructing shopping malls, appealed against a pre-deposit order concerning the denial of CENVAT credit on inputs and input services. A show cause notice alleged wrongful availment of CENVAT credit, leading to disallowance and demand of service tax. The CESTAT's order raised a difference of opinion on pre-deposit necessity for CENVAT credit on input services, ultimately requiring 35% pre-deposit. The 3rd Member emphasized the eligibility of CENVAT credit for certain input services in construction activities, aligning with the technical member's view.

The judgment of Andhra Pradesh High Court was cited concerning input credit denial on construction materials for storage services. However, the CESTAT distinguished this judgment, highlighting the appellant's engagement in constructing commercial malls and renting spaces, not the warehouse's direct construction. The appellant's use of works contract services provider's credit was deemed inapplicable to claim CENVAT credit on inputs. The court noted the exclusion of input credit for construction goods under amended CENVAT Credit Rules 2004.

Ultimately, the High Court upheld the CESTAT's decision, requiring the appellant to deposit 35% of the disputed CENVAT credit. The court clarified that this deposit was only a fraction of the total liability, pending appeal. The appeal was dismissed, emphasizing that the judgment's observations would not impact the case's merits during the final hearing at CESTAT.

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