2012 (9) TMI 376 - AT - Service Tax

CENVAT credit - input services - activities related to initial public offer Held that - Services availed in connection with floating initial public offer and the allied business activities would fall within inclusive part of the definition of input service under Rule 2(1) - waiver of pre-deposit granted

Summary

Issues:
1. Whether the services availed by the appellant for expanding their manufacturing plant qualify as 'input services' under Rule 2(1) of the CENVAT Credit Rules, 2004.
2. Whether there is a nexus between the services received and the manufacturing of machinery in the appellant's factory.
3. Whether the appellant is entitled to waiver of pre-deposit and stay of recovery in relation to the duty, penalty, and interest imposed.

Analysis:
1. The appellant sought waiver of pre-deposit and stay of recovery for duty, penalty, and interest amounting to Rs. 28,12,555/- arising from the denial of CENVAT credit on payments made for professional services related to an expansion project. The Revenue contended that the services were not 'input services' as per Rule 2(1) due to a lack of nexus with manufacturing machinery.

2. The appellant argued that the services were essential for expanding their manufacturing plant and fell within the definition of 'input service' under Rule 2(1). Citing judgments from the Hon'ble Bombay High Court and the Hon'ble Karnataka High Court, the appellant emphasized the nexus between the services and manufacturing activities. The appellant had already paid a portion of the demanded amount.

3. The Tribunal considered the submissions and found a prima facie case for the appellant. It acknowledged that the services related to the expansion project, including activities linked to the initial public offer, could be classified as 'input services' based on the inclusive part of the definition under Rule 2(1) and the precedents cited. Taking into account the partial pre-deposit made by the appellant, the Tribunal granted waiver of pre-deposit and stay of recovery for the remaining service tax amount and the penalty imposed.

This judgment highlights the importance of establishing a nexus between services received and manufacturing activities to determine eligibility for CENVAT credit. The Tribunal's decision to grant relief to the appellant underscores the significance of interpreting statutory provisions in line with judicial precedents to ensure fair treatment in tax matters.