Appellants granted waiver, stay of recovery; permitted to pay service tax from CENVAT credit account.

The Tribunal granted the appellants' request for a waiver of pre-deposit and ordered a stay of recovery of liabilities during the appeal process. The Tribunal found merit in the appellants' argument that they should be allowed to pay the service tax from their CENVAT credit account, emphasizing revenue neutrality and the availability of CENVAT credit for refund even if the tax was paid in cash. The Tribunal considered relevant legal provisions and precedents, ultimately ruling in favor of the appellants in the case concerning service tax demand under the reverse charge mechanism.

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Issues:
1. Appellants challenging service tax demand confirmed under reverse charge mechanism.
2. Appellants seeking to pay service tax from CENVAT credit.
3. Interpretation of relevant legal provisions and precedents.
4. Consideration of revenue neutrality in the case of 100% EOU.

Analysis:

1. The appellants filed a Stay Application and Appeal against the Order-in-Appeal confirming a service tax demand under reverse charge mechanism. The demand was based on the appellants not paying service tax in cash on Business Auxiliary Service received from commission agents abroad. The Order-in-Original confirmed the demand along with interest and penalties under the Finance Act, 1994. The appellants contested the demand, citing legal provisions and precedents allowing payment from CENVAT credit in similar cases.

2. The appellants argued that they should be allowed to pay the service tax from their CENVAT credit account, referring to Section 66A of the Act, Section 68(2) of the Act, and relevant rules. They relied on judgments where CENVAT credit was permitted for paying service tax under reverse charge mechanism. They highlighted the revenue neutrality aspect and cited a Tribunal decision supporting their position.

3. The Departmental Representative opposed the appellants' arguments, stating that the precedents allowing CENVAT credit for GTA services under reverse charge mechanism were not directly applicable to the present case. The representative emphasized the differences in the genesis of reverse charge mechanisms. Additionally, the representative mentioned that even if the service tax was paid in cash, the appellants, being a 100% EOU, could claim a refund of the CENVAT credit due to the nature of their exports.

4. After considering both sides' contentions, the Tribunal analyzed the legal provisions and precedents. While acknowledging the Departmental Representative's arguments, the Tribunal found merit in the appellants' case. The Tribunal noted that the situation was revenue neutral, and even if the service tax was paid in cash, it would be available as CENVAT credit for refund. Therefore, the Tribunal granted a complete waiver of pre-deposit and ordered the stay of recovery of the liabilities during the appeal process.

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