2011 (2) TMI 182 - AT - Service Tax

Waiver of pre-deposit - Cenvat Credit - Prima facie that the services of banking and other financial service received by the party in respect of their private placement of preferential shares for raising the capital are an activity related to the business and hence eligible for Cenvat credit as per the definition of input service given in the Cenvat Credit Rules 2004 - merely because the invoice has been raised on the head office the credit cannot be denied to the factory of the assessee - prima facie case has been made out by the assessee for stay of the recovery of the demands towards Cenvat credit interest and penalty.

Summary

Issues:
- Eligibility of Cenvat credit on service tax paid for banking and financial services in connection with private placement of equity shares.
- Interpretation of 'input service' under Cenvat Credit Rules, 2004.
- Application of recovery, interest, and penalty provisions under Central Excise Act, 1944.

Analysis:
The case involved a company engaged in manufacturing motor vehicle parts and steel forgings, which availed Cenvat credit on service tax for banking and financial services related to private placement of equity shares. A show-cause notice was issued to deny the credit, stating that the services were not used in or in relation to manufacturing. The Additional Commissioner upheld the demand, imposing interest and penalty. The Commissioner (Appeals) also rejected the appeal, leading the company to appeal before the Appellate Tribunal.

The main argument raised was that banking and financial services are 'input services' as they facilitated raising capital for manufacturing activities. The company contended that the services were integral to their business and should be eligible for Cenvat credit. The company also highlighted that the corporate office and factory were in the same premises, justifying the credit even if the invoice was raised on the corporate office.

In support of their stance, the company cited various judgments. The opposing view, presented by the Departmental Representative, emphasized the lack of evidence showing the utilization of raised funds in manufacturing activities, thus questioning the eligibility for Cenvat credit.

After considering both arguments, the Tribunal found that the services for private placement of shares were business-related activities eligible for Cenvat credit as per the Cenvat Credit Rules. The Tribunal noted that the credit could not be denied solely based on invoicing details. Consequently, the Tribunal granted a stay on the recovery of Cenvat credit, interest, and penalty during the appeal's pendency, recognizing a prima facie case in favor of the company.