2014 (1) TMI 558 - AT - Service Tax

Denial of CENVAT Credit - Credit on service tax paid on bank charges - Imposition of equivalent penalty - Held that - definition covers not only services used directly or indirectly in or in relation to manufacture of final products but also various services used in relation to business of manufacture whether prior to manufacture or after manufacture. Needless to say banking charges are paid in relation to purchase of raw materials and sale of finished goods and therefore such services is definitely relatable to the manufacture. Under these circumstances, the appellant is eligible for the credit - Decided in favour of assessee.

Summary

Issues:
1. Denial of credit of service tax on bank charges.
2. Imposition of penalty and interest for wrongly availed Cenvat credit.

Analysis:

Issue 1: Denial of credit of service tax on bank charges
The case revolved around the denial of the benefit of credit of service tax amounting to Rs. 1,80,815/- on the grounds that the credit of service tax paid on bank charges was not admissible, as banking services were deemed not to be considered as input services. The appellant contended that the credit of service tax paid on banking charges was indeed admissible as it was directly related to the manufacturing process. The appellant relied on a decision by the Hon'ble High Court of Mumbai in the case of C.C.E, Nagpur v. Ultratech Cement Ltd., wherein it was established that services used in relation to the business of manufacture, including services related to the purchase of raw materials and sale of finished goods, were eligible for credit.

Issue 2: Imposition of penalty and interest for wrongly availed Cenvat credit
The Tribunal, after considering the submissions made by the appellant's consultant, referred to the decision of the Hon'ble High Court in the case of Ultratech Cement Ltd. The Tribunal observed that banking charges are indeed paid in relation to the purchase of raw materials and sale of finished goods, making such services directly relatable to the manufacturing process. Consequently, the Tribunal held that the appellant was eligible for the credit of service tax on bank charges. As a result, the impugned order confirming the demand of Rs. 1,80,815/- was set aside, thereby favoring the appellant's position.

In conclusion, the judgment by the Appellate Tribunal CESTAT AHMEDABAD ruled in favor of the appellant, allowing the credit of service tax on bank charges and overturning the imposition of penalty and interest for the wrongly availed Cenvat credit.