2015 (10) TMI 2231 - AT - Service Tax

Availment of CENVAT Credit - Banking and Finacial Services - Whether financial advisory service rendered would fall within the definition of input service and credit of service tax taken on the same is eligible or not? - Held That - Services received by appellants are in respect of disposal of their share holding in ING Vysya Life Insurance Co. Pvt. Ltd - Contention of appellants that services used are in relation to their business gains credence and thus same would merit inclusion in the definition of input services - Service Tax paid would be eligible for credit - Decided in favour of assessee.

Summary

Issues:
- Appeal against allowing Cenvat credit of Service Tax on 'Banking and Financial Services' utilized for sale of shares by the assessee.
- Determining whether financial advisory services fall within the definition of input service for claiming service tax credit.
- Establishing the eligibility of service tax paid on financial advisory services for credit under the Cenvat Credit Rules.

Analysis:
The appeal was filed challenging the decision of the Commissioner allowing the Cenvat credit of Service Tax paid on 'Banking and Financial Services' used for the sale of shares. The issue revolved around whether the financial advisory services rendered could be considered as falling within the definition of input service for claiming service tax credit. The definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 was crucial in determining the eligibility of the service tax credit. The services in question were related to the disposal of shareholding in a company, and the appellants argued that these services were essential for their business operations, as financing is necessary for manufacturing activities. The Tribunal agreed with the Commissioner's findings that the services received were covered under the definition of Banking and Financial Services, which are taxable. It was established that the disposal of shareholding facilitated restructuring finances for deployment in various business activities like working capital requirements, purchase of machinery, and raw materials. Therefore, the Tribunal concluded that the services used were indeed in relation to the appellants' business and thus eligible for inclusion in the scope of 'input services', making the service tax paid eligible for credit.

The learned AR contended that there was no nexus between the services rendered and the eligibility for service tax credit. However, the Tribunal, after considering the arguments and the decision cited by the AR in the case of Maruti Suzuki Ltd. v. CCE, Delhi-III, clarified that the Maruti Suzuki case pertained to inputs and not input services. Since the activities like accounting and share registry were clearly covered under the definition of input services, the Tribunal found no fault in the impugned order. Consequently, the appeal against allowing the Cenvat credit of Service Tax on 'Banking and Financial Services' for the sale of shares was rejected. The Tribunal pronounced the order in open court, upholding the decision of the Commissioner regarding the eligibility of service tax credit on financial advisory services under the Cenvat Credit Rules, 2004.