Tribunal Waives Penalty Pre-Deposit in Service Tax Dispute

The Tribunal granted the waiver of pre-deposit of penalty for the Appellant, finding a strong prima facie case and timely reversal of the disputed service tax credit. The Appellant's appeal was allowed, and the requirement of pre-deposit for the penalty was waived, permitting the stay petition.

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Issues:
1. Waiver of pre-deposit of penalty confirmed on the Appellant by the impugned order.

Analysis:
The Appellant manufactured Steel Ingots and received inputs, taking Cenvat credit of Central Excise Duty paid on the input and capital goods. They also claimed credit of service tax paid on the Goods Transport Agency Service. However, when some inputs were removed, they only reversed the Central Excise Duty credit, not the service tax credit on the Goods Transport Agency Service used for receipt of those inputs. The Department contended that both credits should be reversed. The Asstt. Commissioner confirmed the demand, imposed a penalty, and the Commissioner (Appeals) upheld the decision. The Appellant sought waiver of pre-deposit of penalty.

The Appellant's counsel argued that Rule 3(5) mandates reversal of duty paid on inputs when cleared as such, emphasizing that only the Central Excise Duty credit should be reversed, not the service tax credit. On the other hand, the Department argued that both credits should be reversed, as the Appellant rectified the service tax credit only after being notified by the Department, justifying the penalty imposition.

The Tribunal analyzed the situation, distinguishing between goods and services, stating that a manufacturer can claim Cenvat credit on both Central Excise Duty and service tax paid on Goods Transport Agency Service for transportation of inputs. The Tribunal found a strong prima facie case in favor of the Appellant, noting that the entire disputed service tax credit had been reversed before the show cause notice. Consequently, the Tribunal waived the requirement of pre-deposit of the penalty for the appeal hearing, allowing the stay petition.

In conclusion, the Tribunal granted the waiver of pre-deposit of penalty for the Appellant, considering the strong prima facie case and the timely reversal of the disputed service tax credit.

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