2011 (3) TMI 401 - AT - Service Tax

Cenvat credit - professional fees towards providing advisory services for acquisition of company - credit was taken based on an invoice addressed to their registered office and therefore, the Appelant should have taken registration as input service distributor as defined at Rule 2(m) of the Cenvat Credit Rules, 2004 - It is not necessary that credit is to be used for paying the duty on the final product that is coming out of new plant proposed to be set up The provision relating to input service distributor is not applicable here because credit is not getting distributed to many locations. If at all applicable, it is only a procedural requirement and credit cannot be denied so long as there is no case of misuse of credit - Decided in favour of the assessee

Summary

Issues involved:
Denial of Cenvat credit on professional fees for advisory services related to acquisition of company - Interpretation of definition of "input service" under Cenvat Credit Rules - Nexus of services with manufacturing activity - Applicability of precedents on business activities - Requirement of input service distributor registration - Nexus of services with goods manufactured - Utilization of credit on output services or final products.

Analysis:
1. The Appellant challenged the denial of Cenvat credit on professional fees for advisory services related to acquiring a company, arguing that the services were indirectly connected to manufacturing activities. The Commissioner (Appeals) rejected this argument, stating that the services did not qualify as 'input service' under the defined parameters. The Counsel for the Appellant relied on the Mumbai High Court's decision in Coca Cola India Ltd case, emphasizing that business activities extend beyond mere manufacturing and cover various related functions. The Counsel also cited the Nagpur Bench's ruling in CCE Nagpur Vs Ultratech Cement Ltd to support the broad interpretation of 'input service' to include services integral to manufacturing business.

2. The Counsel further contended that the list of services under 'input service' definition is illustrative, not exhaustive, and the management consultancy for acquiring a new factory falls within the ambit of business activities. On the contrary, the learned DR argued against the nexus of acquiring a new factory with manufactured goods and raised capital with the existing company's operations, citing precedents like Maruti Suzuki Ltd and Manik Chand Vs CCE Nagpur.

3. The Tribunal noted a factual error in the Commissioner (Appeals) finding regarding the purpose of advisory services, clarifying that the services were related to acquiring a new company, not raising capital for a new entity. Referring to the Ultratech Cement case, the Tribunal rejected the restrictive interpretation of 'input service' and emphasized that once credit is eligible, it can be utilized on any output services or final products without restriction to the specific product manufactured using the input service.

4. Addressing the issue of invoice registration and the requirement for input service distributor status, the Tribunal ruled that credit cannot be denied based on the location of invoice issuance. The Tribunal emphasized that the input service distributor provision is procedural and credit cannot be denied unless there is misuse. Furthermore, the Tribunal found no merit in the argument that the impugned services differed from those in previous cases, asserting that the key issues remained the same. Consequently, the Tribunal allowed the appeal, granting consequential relief to the Appellant.