2012 (8) TMI 564 - AT - Service Tax

Waiver of pre-deposit denial of Cenvat credit of Service tax paid on stock brokers services - appellant is a promoter of Airtel JT Mobiles. They had held shares for a long time and finally they sold them and got out of the tag of promoters Held that - whether disinvest is business activity or not has to be considered in detail by examining the activities of the appellant over a period of time, its memorandum and articles of association and other relevant facts before coming to a conclusion matter remanded - pre-deposit is to be waived

Summary

Issues:
1. Denial of Cenvat credit on service tax paid for stock broker services.
2. Interpretation of input service definition in relation to business activities.
3. Determining whether investment and subsequent disinvestment in a company qualifies as a business activity.

Analysis:
1. The appellant's Cenvat credit of service tax paid on stock broker services for selling shares to Airtel was denied. The denial was based on the argument that the service tax paid on the sale of shares was not related to the manufacturing activity undertaken by the appellant. The appellant, a promoter of Airtel JT Mobiles, had held shares for a significant period before selling them. The denial was challenged by the appellant, contending that the service tax paid should be eligible for Cenvat credit as it was utilized for various activities related to the business of the company, which included hardware and software manufacturing in the telecommunication sector.

2. The advocate representing the appellant argued that the service received by the appellant, involving selling shares after being a promoter of a telecom provider, was indeed related to their business activities. Citing a decision of the Hon'ble High Court of Bombay in a similar case, it was emphasized that the inclusive part of the definition of input service should be broadly interpreted to determine if the service tax paid was in connection with the business activity. The appellant's involvement in the telecommunication sector and their role as an initial promoter of a telecom provider were highlighted to support the claim for Cenvat credit.

3. The dispute also revolved around whether the investment and subsequent disinvestment in shares could be considered a business activity of the appellant. The Tribunal noted that while the specific decision of the High Court of Bombay did not directly apply to the appellant's case, the principle established emphasized evaluating whether the activity for which service tax was paid and credit taken was related to the business activity. It was deemed necessary to examine the appellant's activities over time, their memorandum, articles of association, and other relevant factors to determine if disinvestment qualified as a business activity. In light of the High Court's decision, the Tribunal found that the appellant had presented a prima facie case in their favor, leading to the waiver of pre-deposit and granting a stay against the recovery of dues during the appeal process.