2014 (5) TMI 218 - HC - Service Tax

Denial of CENVAT credit on stockbroker s service - Input service under Rule 2(l) of CCR, 2004 - stockbroker s service used for the purpose of disposal of the shares held in another company Held that - on a perusal of even the main objects and objects incidental or ancillary to the attainment of main objects of the appellant, it is not that the assessee is carrying only the main objects and not the incidental objects as in sub-para 8 of Part B. But the question whether the incidental object of investing and dealing in shares would in any way relate to and form part of the main business of the assessee has been answered by the authorities in the negative. The fact remains the incidental business which finds mention in para-8 is not being actually carried on and a categorical finding is given by all the authorities in that regard. Therefore, we are of the opinion that the claim for input service credit is not against any liability arising out of the business activity of the assessee and not relatable to the business activity of the assessee and therefore, we find that there is no scope for interfering with the order of the Tribunal - Decided against assessee.

Summary

Issues Involved:
1. Scope of the Tribunal's inquiry.
2. Memorandum of Association and Director's affidavit relevance.
3. Definition of input service under Rule 2(l) of CCR, 2004.
4. Consistency with earlier Tribunal decisions.

Issue-wise Detailed Analysis:

1. Scope of the Tribunal's Inquiry:
The appellant questioned whether the Tribunal exceeded its jurisdiction by inquiring into the application of the sale proceeds of shares while dismissing the appeal. The Tribunal examined the connection between the sale of shares and the appellant's business activities, ultimately finding no integral connection, thus dismissing the appeal.

2. Memorandum of Association and Director's Affidavit Relevance:
The Tribunal assessed whether the appellant's sale of shares was connected to its business activities as per the Memorandum of Association and the Director's affidavit. The affidavit stated that the sale proceeds were used for operational purposes, including paying creditors and salaries. However, the Tribunal found no evidence in the Memorandum of Association or the affidavit to show that the shares were sold for purposes integrally connected with the appellant's business.

3. Definition of Input Service under Rule 2(l) of CCR, 2004:
The core issue was whether the stock broker's service used for selling shares qualified as an input service under Rule 2(l) of the Cenvat Credit Rules, 2004. The Tribunal, referencing the Supreme Court's decision in Maruti Suzuki Ltd. v. Commissioner and the Bombay High Court's decisions in Commissioner v. Ultratech Cement Limited and Commissioner v. Manikgarh Cement, concluded that the stock broker's service did not have an integral connection with the appellant's manufacturing activities. Thus, the service did not qualify as an input service.

4. Consistency with Earlier Tribunal Decisions:
The appellant argued that the Tribunal did not follow its earlier decision in the Bharat Fritz Werner case on a similar issue. However, the Tribunal maintained its stance based on the specific facts and legal precedents applicable to this case, emphasizing the lack of integral connection between the sale of shares and the appellant's main business activities.

Conclusion:
The High Court upheld the Tribunal's decision, agreeing that the appellant did not establish an integral connection between the sale of shares and its business activities. The court dismissed the appeal, affirming that the stock broker's service did not qualify as an input service under Rule 2(l) of the Cenvat Credit Rules, 2004, and there was no error in the Tribunal's findings. The appeal was dismissed as it did not involve any question of law requiring further examination.