2013 (11) TMI 396 - AT - Service Tax

CESTAT Chennai: Disallowance of CENVAT Credit on Construction Materials under Works Contract Service

The Appellate Tribunal CESTAT CHENNAI addressed the disallowance of CENVAT credit on iron and steel products used in construction under Works Contract ... Works Contract - availing cenvat credit on Inputs while opting for composition scheme - Waiver of Pre-deposit – Revenue was of the view that the contractor opted to pay service tax under Works Contract Service by availing the benefit of Notification No.32/07-ST and iron and steel products were used in the construction and civil construction - Held that:- Prima facie the applicant is liable to pay duty on the construction and civil construction - the contention of learned counsel on the applicability of Notification No.32/07-ST would be looked into at the time of appeal hearing - payment made by the applicant is sufficient for waiver of pre-deposit of balance amount of duty along with interest and penalty – Pre-deposit of balance amount of duty along with interest and penalty waived till the disposal – stay granted. Issues:1. Disallowance of CENVAT credit on iron and steel products used in construction under Works Contract Service.2. Applicability of Notification No.32/07-ST to service provider or service recipient.3. Waiver of predeposit of balance amount of duty, interest, and penalty pending appeal.Issue 1: Disallowance of CENVAT credit on iron and steel products used in construction under Works Contract ServiceThe applicant, engaged in cement manufacturing, availed CENVAT credit on iron and steel products supplied to their contractor for constructing Clinker silos. The adjudicating authority disallowed the credit, citing the contractor's payment of service tax under Works Contract Service and the use of iron and steel in construction. The Tribunal noted the authority's observation that materials were indeed used in construction and civil purposes. However, the Tribunal acknowledged the applicant's argument that iron and steel articles used in clinker silos are eligible for credit, referencing a Supreme Court decision. The Tribunal decided to further examine this contention during the appeal hearing.Issue 2: Applicability of Notification No.32/07-ST to service provider or service recipientThe applicant argued that the condition of Notification No.32/07-ST, which the adjudicating authority relied on, applies to the service provider and not the service recipient. Additionally, the applicant had already reversed a portion of the credit under protest. The Tribunal considered these submissions and decided that the applicability of the notification would be scrutinized during the appeal hearing. The Tribunal found the payment made by the applicant sufficient for waiving the predeposit of the balance amount of duty, interest, and penalty pending the appeal's disposal.Issue 3: Waiver of predeposit of balance amount of duty, interest, and penalty pending appealAfter considering the arguments from both sides, the Tribunal concluded that the payment made by the applicant was adequate for the waiver of predeposit of the remaining duty, interest, and penalty. As a result, the Tribunal granted a stay on the recovery of the balance amount of duty, interest, and penalty until the appeal is resolved. The stay application was allowed, and the recovery was stayed pending the appeal's outcome.This judgment from the Appellate Tribunal CESTAT CHENNAI addressed the disallowance of CENVAT credit on iron and steel products used in construction, the interpretation of Notification No.32/07-ST, and the waiver of predeposit of balance duty, interest, and penalty pending appeal, providing a detailed analysis of each issue raised by the parties involved.