Pre-deposit waiver and stay granted on limitation and debatable Cenvat credit eligibility under input service distributor invoices

A waiver of pre-deposit and stay of recovery were granted where the demand was challenged on limitation and on the alleged ineligibility of Cenvat credit distributed through input service distributor invoices. The Tribunal noted that the credit related to sale of properties and appeared debatable on merits because it did not prima facie fall within the definition of input service. It also found a strong prima facie case on limitation, as the audit objection arose in June 2009, the assessee replied in July 2009, but the show cause notice was issued only in February 2011. Recovery was stayed pending disposal of the appeal.

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Issues: Whether waiver of pre-deposit and stay of recovery should be granted where the demand was challenged on limitation and on the alleged ineligibility of Cenvat credit on input service distributor invoices.

Analysis: The record showed that the service tax credit had been distributed by the head office as an input service distributor. The Tribunal noted that the service tax related to sale of properties and that, on merits, the credit appeared debatable because it did not prima facie fall within the definition of input service. The Tribunal also found that the audit objection arose in June 2009, the appellant replied in July 2009, but the show cause notice was issued only in February 2011, giving the appellant a strong point on limitation. On that basis, the Tribunal held that a prima facie case on limitation was made out.

Conclusion: Waiver of pre-deposit was granted and recovery was stayed till disposal of the appeal, in favour of the assessee.

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