2012 (8) TMI 848 - AT - Central Excise

Availment of CENVAT Credit - Distribution of credit - Held that - prima facie the utilization of the services of management consultant services for the purpose of selling one of the divisions of the appellant-assessee for the purpose of raising finance should be treated as input service and therefore the credit may be admissible and that distribution of the said credit to the appellant s manufacturing unit in Bangalore is validly done. In view of the above the demand raised and penalties imposed prima facie are not justified - Stay granted.

Summary

Issues:
Admissibility of credit for services of a management consultant under CENVAT Credit Rules.

Analysis:
The case involved the appellants engaged in various activities, including selling one of their divisions, the API Division, Chennai, with the help of a management consultant, M/s. Avendus Advisors Pvt. Ltd. The appellants treated the services as input services, took credit for the Service Tax paid, and distributed the credit to their manufacturing unit in Bangalore. The original authority disallowed the credit, leading to penalties and recovery orders. The Commissioner (Appeals) upheld the original decision.

The advocate for the appellants argued that raising finance for the company is an integral part of their business activities, and using the services of a management consultant for divesting business activities should be considered an 'input service' under the CENVAT Credit Rules. The Additional Commissioner (AR) supported the Commissioner (Appeals)' findings.

Upon reviewing the submissions and records, the Tribunal found that utilizing the services of a management consultant to sell a division for raising finance qualifies as an 'input service' under the CENVAT Credit Rules. Consequently, the Tribunal deemed the credit admissible and the distribution of credit to the manufacturing unit in Bangalore valid. As a result, the demand for recovery and imposed penalties were considered unjustified.

Therefore, the Tribunal allowed the applications, waived the pre-deposit of dues as per the impugned order, and stayed the recovery until the appeals were disposed of. The judgment was pronounced and dictated in open court by the Tribunal.