Cenvat credit utilisation for service tax payment supported waiver of pre-deposit and stay of recovery pending appeal.

Cenvat credit utilisation for payment of service tax by a service recipient was held to give the applicants a prima facie case where the demand arose from denial of such utilisation based on a CBEC circular. The Tribunal relied on earlier decisions recognising that credit could be used for this purpose, and therefore granted waiver of pre-deposit of service tax and penalty. Recovery was stayed pending disposal of the appeal.

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Issues: Whether the applicants were entitled to waiver of pre-deposit of service tax and penalty pending appeal, in view of the challenge to denial of utilisation of Cenvat credit for payment of service tax on agency commission under the relevant service categories.

Analysis: The demand arose from denial of Cenvat credit utilisation for payment of service tax on input service, based on a CBEC circular. The Tribunal noted that earlier decisions had already held that Cenvat credit could be utilised for payment of service tax by the service recipient, and that the applicants, as service recipients liable to pay service tax, had a prima facie case in their favour.

Outcome: Pre-deposit of the service tax and penalty was waived and recovery was stayed pending disposal of the appeal.

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