2014 (8) TMI 451 - AT - Service Tax

Denial of CENVAT Credit - business auxiliary services - Whether the services of M/s. Kapsons used for arranging the loan amount, on which the said M/s. Kapsons have paid the Service Tax under the category of business auxiliary services , can be held to be eligible cenvatable service or not - Held that - definition of input service, as contained in Rule 2(l) of Cenvat Credit Rules, allows credit in respect of services which are used in relation to activities relating to business, such as accounting, auditing, financing etc. The expression such as has been subject matter of various decisions and it stand held that the same is inclusive and not exclusive definition - Admittedly finance is required for running of business and the services of loan broken, which stand utilized for procurement of such finance has to be held to be in relation to business activities - definition itself, while giving example of input services include the services of Financing in the input service definition. Though M/s. Kapsons have not financed the business themselves but they have admittedly, by arranging a loan, have provided service relating to financing - appellant is entitled to the benefit of Cenvat credit - Decided in favour of assessee.

Summary

Issues: Denial of Cenvat credit on service tax paid by a third party for arranging a loan, interpretation of 'input service' under Cenvat Credit Rules.

In this case, the appellant, a manufacturer of aluminium castings for motor vehicles, availed the services of a third party, Kapsons Associate Pvt. Ltd., to arrange a loan from a bank. Kapsons raised invoices on the appellant for service charges along with service tax paid under business auxiliary services. The original authority denied the Cenvat credit on the service tax paid by Kapsons, which was upheld by the Commissioner (Appeals), leading to the present appeal.

The appellant argued that the loan was utilized in their business activity and falls under the wide definition of 'input service,' making the credit regular. The Departmental Representative contended that the appellant did not provide details on how the loan amount was utilized for business activities.

The key issue for consideration was whether the services provided by Kapsons for arranging the loan, on which service tax was paid, qualify as eligible cenvatable services. The Tribunal analyzed the definition of 'input service' under Rule 2(l) of the Cenvat Credit Rules, which allows credit for services used in activities related to business. The Tribunal clarified that the term 'such as' in the definition is inclusive, not exclusive. It was established that without the service provided by Kapsons, the appellant could not have conducted their business, as finance is essential for business operations. Referring to previous decisions, including a Larger Bench decision and a Bombay High Court case, the Tribunal concluded that the definition of 'input services' is broad enough to encompass services necessary for business operations, including financing services. Although Kapsons did not directly finance the business, arranging the loan constituted a service related to financing, entitling the appellant to Cenvat credit.

Ultimately, the Tribunal set aside the impugned orders, allowing the appeal and granting consequential relief to the appellant. The judgment was pronounced on 11-9-2012.