2015 (12) TMI 276 - AT - Service Tax

Tribunal orders pre-deposit of Rs. 20.34 lakhs under Section 35F Central Excise Act

M/s MAGNUM VENTURES LTD Versus COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, GHAZIABAD

The tribunal ordered the appellant to make a pre-deposit of Rs. 20.34 lakhs along with proportionate interest within four weeks to meet the requirements ... Waiver of pre deposit - appellant had not paid 6%/8% of the value of the exempted service while they had taken Cenvat credit without maintaining of separate accounts of input service credit in respect of taxable as well as exempted output services - Held that:- restaurant and short term accommodation services were not taxable during the relevant period and in the absence of definition of 'service' it is hard to say that these were 'services' on which no service tax was leviable under Section 66 of the Finance Act because Section 66 of the Finance Act levied service tax on taxable services enumerated in Section 65 (105) and as the valuation provisions in Section 67 only provided mechanism for valuation of taxable services the levy of service tax under Section 66 other than taxable services would prima facie fail in the absence of valuation provisions (refer the Supreme Court judgement in the case of CIT, Bangalore Vs. B.C. Srinivasa Setty [1981 (2) TMI 1 - SUPREME Court]. - pre-deposit of the amount of Cenvat credit taken towards so-called 'non-taxable output service' along with proportionate interest would meet the requirement of Section 35F of Central Excise Act, 1944. - Partial stay granted. Issues:- Demand of Rs. 1,64,00,749 confirmed under Rule 6(3)(i) / Rule 14 of Cenvat Credit Rules and Section 73(1) of the Finance Act 1994.- Appellant's contention regarding taxable services and exempted services.- Interpretation of the Bombay High Court judgment in CCE Vs. Nicholas Piramal (India) Ltd.- Requirement of pre-deposit under Section 35F of the Central Excise Act, 1944.Analysis:1. The appeal was filed against an order confirming a demand of Rs. 1,64,00,749 for the period 2010-2011 under Rule 6(3)(i) / Rule 14 of Cenvat Credit Rules and Section 73(1) of the Finance Act 1994. The demand was based on the appellant not paying a percentage of the value of exempted services while taking Cenvat credit without maintaining separate accounts for input service credit related to taxable and exempted output services.2. The appellant argued that the total service tax credit taken was Rs. 33,47,302, with a proportionate Cenvat credit of Rs. 20,34,189 related to non-taxable services. They also cited a previous case where a stay was granted subject to a pre-deposit. Additionally, they contended that restaurant and short term accommodation services were not taxable during the period in question, hence the demand for a percentage of their value was unsustainable.3. The Departmental Representative (DR) referred to a Bombay High Court judgment in the case of CCE Vs. Nicholas Piramal (India) Ltd., stating that the issue was settled, and the appellant was required to pay a percentage of the value of exempted services due to the lack of separate accounts.4. The tribunal examined the contentions of both parties and reviewed the previous order involving a similar demand. It was noted that the taxable nature of restaurant and short term accommodation services during the relevant period was in question. Without a clear definition of 'service' and considering the absence of specific valuation provisions for non-taxable services under Section 66 of the Finance Act, the levy of service tax on such services was deemed questionable.5. Consequently, the tribunal ordered a pre-deposit of Rs. 20.34 lakhs along with proportionate interest within four weeks to meet the requirements of Section 35F of the Central Excise Act, 1944. Compliance was to be reported by a specified date, with a stay on the recovery of the remaining liability during the appeal process, subject to the pre-deposit. Failure to comply would result in the dismissal of the appeal.