CENVAT credit and SEZ service tax dispute: waiver of pre-deposit granted and recovery stayed pending appeal.

Waiver of pre-deposit was granted in appeals challenging denial of CENVAT credit and service tax demand because the appellants showed a strong prima facie case. One period was said to be covered by the retrospective amendment introduced by clause 144 of the Finance Bill, 2012. For the remaining periods, the Tribunal applied its earlier view that Notification No. 4/2004-S.T. operated as a conditional exemption for services supplied to units in a Special Economic Zone, so the restrictions under Rule 6 of the CENVAT Credit Rules, 2004 would not apply. Recovery of the disputed dues was stayed until disposal of the appeals.

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Issues: Whether waiver of pre-deposit and stay of recovery should be granted in the appeals concerning denial of CENVAT credit and demand of service tax.

Analysis: The period covered by one appeal was stated to be covered by the retrospective amendment introduced by clause 144 of the Finance Bill, 2012. For the remaining periods, the Tribunal relied on its earlier view that Notification No. 4/2004-S.T. constituted a conditional exemption for services provided to units in the Special Economic Zone and that the restrictions under Rule 6 of the CENVAT Credit Rules, 2004 would not apply. On that basis, the appellants were found to have a strong prima facie case.

Conclusion: Waiver of pre-deposit was granted and recovery of the dues was stayed till disposal of the appeals.

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