2015 (7) TMI 714 - AT - Service Tax

Denial of CENVAT Credit - whether the credit of service tax paid on the service of the Private Placement of Shares is admissible as input service credit as per the Cenvat Credit Rules - Held that - It is the case of the appellant, that they raised capital by private placement of Shares, for the purpose of implementing a new project, the Automotive Wheel Line Project in their factory. The contention of the revenue that such financial services rendered to the appellant for the purpose of raising capital is not related to manufacture directly or indirectly cannot be accepted. The definition of input service is not restricted being limited to services which are directly linked to the manufacturing activity. But the definition has a wide ambit and covers services which are relating to business activities of manufacture. In Aditya Birla Nuvo Ltd Vs CCE (2009 (1) TMI 117 - CESTAT AHMEDABAD) it was held that merger charges are covered in the category of services of financing and Cenvat credit is admissible for the same. Therefore I am of the view that the service of private placement of shares for raising capital is an input service and credit on the service is to be allowed. - impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
Whether the credit of service tax paid on the service of Private Placement of Shares is admissible as input service credit as per the Cenvat Credit Rules.

Analysis:
The case involved a dispute regarding the admissibility of Cenvat credit for service tax paid on the service of Private Placement of Shares. The appellant, engaged in manufacturing Automotive Wheels, availed services from a company for raising finance through Private Placement of Shares. The service provider charged a fee along with service tax, which the appellant sought to claim as input service credit. However, a show cause notice was issued denying the credit on the grounds that financial services for disposal of shares are not covered under the definition of "input services." The appellant contended that banking and financial services fall under the definition of "input services" as per Rule 2(l) of the Cenvat Credit Rules. The adjudicating authority and the Commissioner (Appeals) ruled against the appellant, leading to the appeal.

The appellant argued that the activity of raising finances through Private Placement of Shares was directly related to their business of manufacturing, as the capital raised was utilized in their manufacturing operations. The appellant's counsel cited relevant judgments to support their argument. On the other hand, the revenue contended that Private Placement of Shares did not directly or indirectly relate to the manufacture of final products, thus making Cenvat credit inadmissible for such services. The revenue emphasized that Private Placement of Shares was not explicitly mentioned in the definition of input services.

The tribunal analyzed the submissions and held that the appellant's action of raising capital through Private Placement of Shares for implementing a new project was indeed related to their manufacturing business. The tribunal noted that the definition of "input service" is not limited to services directly linked to manufacturing activities but includes services related to business activities of manufacture. Citing a precedent, the tribunal established that services like merger charges fall under the category of financing services eligible for Cenvat credit. Consequently, the tribunal ruled in favor of the appellant, allowing the credit on the service of Private Placement of Shares.

In conclusion, the tribunal set aside the impugned order, providing consequential relief to the appellant by allowing the appeal. The judgment was pronounced on 17/06/2015.