2016 (11) TMI 424 - AT - Central Excise

Cenvat credit - Input service - Sales promotion and market research - Rule 2 (l) of the Cenvat Credit Rules, 2004 - Held that - In the instant case, the activities undertaken by the appellant clearly falls under the head of sales promotion and therefore, credit on the same cannot be denied - Appeal allowed.

Summary

Issues: Denial of credit of service tax paid on hotel and conference services used for auction and marketing conference.

Analysis:
1. Issue of Input Service Definition: The appellants, manufacturers of steamless pipes, availed credit of service tax paid on hotel and conference services used for auction and marketing conference. The credit was denied by the original adjudicating authority and the first appellate authority. The learned Counsel for the appellant argued that the services fall under the definition of input service as per the Cenvat Credit Rules, including sales promotion as one of the activities. He contended that since the services were for auctions and sales promotion, the credit should be allowed.

2. Arguments and Authorities: The learned Assistant Commissioner relied on the impugned order and cited the decision of the Hon’ble Supreme Court in Maruti Suzuki Ltd. Vs. CCE 2009 and the decision of the Hon’ble CESTAT in Vandana Global Ltd., Vs. CCE 2010. He argued that there was no nexus between the manufacturing activities and the hotel services received by the appellants.

3. Analysis of Impugned Order: The Tribunal examined the purpose for which the services were used, noting that they were availed in connection with the auction of scrap generated during the manufacturing process and in marketing conferences. The definition of input service under Rule 2(l) of the Cenvat Credit Rules was considered, which includes activities like sales promotion and market research. The Tribunal found that the activities undertaken by the appellant clearly fell under sales promotion, and therefore, the credit on the services could not be denied.

4. Decision: The Tribunal allowed the appeal, emphasizing that the definition of input service encompassed sales promotion, which was the nature of the activities undertaken by the appellant in this case. The denial of credit for the services used for sales promotion and marketing conferences was overturned, and the appeal was allowed in favor of the appellant.

5. Conclusion: The judgment highlights the importance of aligning the services utilized with the definition of input service under the relevant rules. In this case, the Tribunal emphasized that activities such as sales promotion, falling within the ambit of the input service definition, should not be denied credit. The decision serves as a reminder to carefully analyze the purpose and nature of services availed to determine their eligibility for tax credit under the applicable regulations.