2013 (11) TMI 1401 - AT - Service Tax

Tribunal denies cenvat credit, imposes penalty for lack of nexus. Deposit condition for stay on recoveries

M/s. Sadbhav Infrastructure Project Limited Versus Commissioner of Service Tax, Ahmedabad

The Tribunal ruled in favor of the respondent, denying cenvat credit and imposing a penalty on the appellant due to the lack of nexus between input and ... Stay application - Denial of CENVAT Credit - Nexus with the output service of ‘Management Consultancy Services and Works Contract services’ - applicability of Rule 6(5) where input services are related to exempted services - Held that:- It is observed from the opening paragraph of the contract dated 27.7.2007 entered between the appellant and M/s. Yes Bank Limited that Sadbhav Infrastructure Project Limited (SIPL for short) has been given alternate names ‘Sadbhav’ or ‘Company’ - it is possible that Yes Bank Limited has provided services to all the group Companies and payment part has been done by the appellant for the purpose of taking cenvat credit. Further, whether the services for which cenvat credit has been taken has got nexus with the output services provided by the appellant needs deeper consideration. Appellant has, therefore, not made out a prima facie case for complete waiver and is required to be put to certain condition - Partial stay granted. Issues involved:1. Denial of cenvat credit and imposition of penalty on grounds of lack of nexus between input services and output services.2. Interpretation of provisions of Rule 2(l) and Rule 6(5) of the Cenvat Credit Rules, 2004.3. Argument regarding services provided by ICICI Bank Limited and Yes Bank Limited.4. Examination of relevant clauses of the contract dated 27.7.2007 between the appellant and Yes Bank Limited.5. Determination of prima facie case for complete waiver and imposition of conditions for stay application.Analysis:1. The appellant filed a stay application against the order denying cenvat credit of Rs. 2,17,39,812/- and imposing a penalty. The denial was based on the lack of nexus between the input services received and the output services of 'Management Consultancy Services and Works Contract services' provided by the appellant. The appellant argued that all services availed were used in relation to providing output services, citing relevant provisions of the Cenvat Credit Rules, 2004 and relied on various case laws to support their claim.2. The appellant's representatives contended that even if some services were related to exempted services, the cenvat credit could not be denied as per Rule 6(5) of the Cenvat Credit Rules, 2004. The Tribunal examined the provisions of Rule 2(l) and Rule 6(5) in light of the arguments presented by both sides to determine the admissibility of cenvat credit in the given scenario.3. The respondent argued that the services for which cenvat credit was claimed did not have a nexus with the output services provided by the appellant, as highlighted in the original order. Reference was made to the contract between the appellant and Yes Bank Limited, emphasizing that the services were not exclusively for the appellant but extended to other group companies as well, questioning the eligibility of the appellant for cenvat credit.4. Upon reviewing the contract dated 27.7.2007 between the appellant and Yes Bank Limited, the Tribunal noted the scope of services provided by the bank, indicating a broader engagement beyond the appellant alone. The Tribunal observed that the appellant had not established a prima facie case for complete waiver and imposed a condition for depositing a specified amount within a set timeframe, subject to which a stay on recoveries was granted until the appeal's disposal.5. The Tribunal, through its judgment pronounced on 10.10.2013, directed the appellant to comply with the specified deposit condition and report to the Deputy Registrar by a set date for further orders, maintaining a stay on recoveries pending appeal resolution. This decision balanced the interests of both parties while ensuring compliance with legal provisions and the need for a prima facie case to warrant relief.By considering the arguments, legal provisions, and contractual terms, the Tribunal provided a reasoned decision on the stay application, setting out conditions for further proceedings in the case.