Prima facie CENVAT credit on service tax paid for lease rent justified waiver of pre-deposit and stay of recovery.

Credit on service tax paid on lease rent was held prima facie admissible where the leased factory had been taken over by a secured creditor under the SARFAESI regime, because the borrower's ownership rights were not extinguished and the tax payment itself was not disputed. The Tribunal found the demand, including the extended-period invocation, to be debatable and requiring examination at final hearing. On that basis, waiver of pre-deposit was granted and recovery of CENVAT credit, interest and penalty was stayed pending disposal of the appeal.

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Issues: Whether the appellant was entitled to waiver of pre-deposit and stay of recovery in relation to the demand of CENVAT credit, interest and penalty, on a prima facie view that credit taken on service tax paid on lease rent was admissible.

Analysis: The dispute turned on whether the leased factory had been taken over by the secured creditor under the SARFAESI regime, and whether the service tax paid on lease rent, though deposited in the name of the original borrower, could be treated as validly paid for purposes of credit. The Tribunal noted that the secured creditor was exercising powers over the asset under the SARFAESI Act and that ownership rights of the borrower were not extinguished. It further observed that tax payment was not disputed and that the validity of the demand, including invocation of the extended period, required examination at final hearing. On this view, the issue was considered debatable and credit appeared prima facie allowable.

Conclusion: Waiver of pre-deposit was granted and recovery of tax, interest and penalty was stayed till disposal of the appeal.

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