2015 (1) TMI 143 - AT - Service Tax

CENVAT credit - Bank and Financial Services and Credit Card service - nexus/proximity to the output services - exemption under Notification no. 19/2009 - Availment of credit in respect of various assets - Held that - Issue is debatable as regards the credit availed in respect of impugned goods being item of furniture etc. like sofa, almirah etc. and further there is prima facie case in favour of the appellant as regards the other inputs services on which CENVAT credit is availed. In this view of the matter, it is just and proper to direct the appellant to make the pre-deposit of ₹ 40 lakhs and report compliance on 13.01.2015. The appellant will be entitled to adjust out of the amount of pre-deposit, the amount which they have already paid towards or in connection with the impugned demand. Subject to such compliance, the appellant shall be entitled to stay of the balance amount of tax, interest and penalty till disposal of the appeal. - partial stay granted.

Summary

Issues: Alleged inadmissible CENVAT credit on goods, lack of nexus with output services, services provided by Forex Broker, and challenge on grounds of limitation.

Inadmissible CENVAT Credit on Goods:
The appellant, a banking company, was alleged to have availed inadmissible CENVAT credit on goods not qualifying as capital goods under Rule 2(a) of the CENVAT Credit Rules. The goods included assets like almirah, chairs, fire resistant file cabinets, etc. The appellant contended that even if these items did not technically qualify as capital goods, they qualified as inputs under Rule 2(k) read with Rule 3 of the CENVAT Credit Rules. The appellant argued that these assets were used in providing output services and therefore, the CENVAT credit availed should be allowed.

Lack of Nexus with Output Services:
The appellant also faced allegations of availing CENVAT credit on services lacking nexus with output services. These services included club or association services, transport of goods by road, and travel agents services. The appellant defended the utilization of these services, stating they were essential for promoting and conducting its business effectively and profitably. The appellant highlighted that these expenses were fully incurred for business purposes with a direct nexus, justifying the availed CENVAT credit.

Services Provided by Forex Broker:
Regarding services provided by a Forex Broker exclusively used for inter-bank forex trading, which was exempted under Notification no. 19/2009, the appellant argued that the services were not solely used for inter-bank trading. They contended that the appellant provided taxable services apart from inter-bank trading, falling under the category of "Banking and other Financial services." The appellant challenged the show-cause notice on the ground of limitation and sought to establish a prima facie case in their favor.

Challenge on Grounds of Limitation:
The show-cause notice challenged by the appellant was adjudicated in the impugned order-in-original, confirming the proposed demand with interest and imposing a penalty. The appellant appealed before the Tribunal, emphasizing that the CENVAT credit availed on input services was used in providing output services. They relied on tribunal rulings to support their argument that the credit availed should be allowed. The Tribunal found a debatable issue regarding the credit availed on goods like furniture and directed the appellant to make a pre-deposit, allowing a stay of the balance amount of tax, interest, and penalty pending disposal of the appeal.

This comprehensive analysis covers the issues of alleged inadmissible CENVAT credit on goods, lack of nexus with output services, services provided by a Forex Broker, and the challenge on grounds of limitation, presenting a detailed overview of the judgment delivered by the Appellate Tribunal CESTAT MUMBAI.