2019 (6) TMI 1593 - AT - Service Tax

CENVAT Credit - input services - repossession of vehicle provided by the various recovery agent to the Appellant against the output service of the Appellant i.e. lending of money - HELD THAT - An identical issue covering the earlier period i.e. April 2007 to March 2012 and it was decided in favour of the Appellant by this Tribunal in M/S. BAJAJ FINANCE LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE PUNE 2017 (11) TMI 658 - CESTAT MUMBAI by which this Tribunal has held that the Appellant are entitled for the Cenvat credit on the service of repossession of vehicle provided by the various recovery agent to the Appellant against the output service of the Appellant i.e. lending of money. Since on an identical issue between the same parties this Tribunal has taken a view to allow the appeal - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availability of Cenvat credit on service tax paid by third-party agencies for vehicle repossession services.

Analysis:
The appeal was filed challenging the order passed by the Commissioner of Service Tax (Appeals) regarding the availability of Cenvat credit on service tax paid by third-party agencies for repossession of vehicles. The Appellants, engaged in providing banking and financial services, extended loans for the purchase of motor cycles and commercial vehicles. The Appellants outsourced the repossession activity to third-party agencies who recovered the vehicles from defaulting customers and charged the Appellants for the services along with service tax. The Central Excise Department observed that the Appellants were availing Cenvat credit on the service tax paid for repossession activities, including seizing charges. A demand for recovery of the availed Cenvat credit was issued to the Appellants, which was upheld in the Order-in-Original and by the Commissioner in the impugned order.

The Tribunal heard arguments from both sides and noted that a similar issue for the earlier period was decided in favor of the Appellant in a previous order. The Tribunal analyzed the nature of the Appellant's lending services, emphasizing that the recovery of lent money, including vehicle repossession, is an integral part of the lending activity. Referring to the definition of input service under the Cenvat Credit Rules, the Tribunal concluded that the service of repossession by recovery agents qualifies as an input service used for providing the output service of lending money. The Tribunal also considered the repossession as part of the security service, as the vehicles were hypothecated with the Appellant as security. Therefore, the Tribunal held that the Appellant is entitled to Cenvat credit on the service of repossession provided by the recovery agents against the output service of lending money.

The Tribunal found no contrary view from higher authorities and agreed with the previous Tribunal's decision, maintaining consistency. Consequently, the appeal was allowed, providing consequential relief to the Appellant. The Tribunal's decision was based on the interpretation of the Cenvat Credit Rules and the integral relationship between the lending services and the recovery activities, ensuring the availability of Cenvat credit on the service tax paid by third-party agencies for repossession services.