2017 (5) TMI 939 - AT - Central Excise

CENVAT credit - Banking & Other Financial Services - scope of input services - advisory and placement charges relating to private placement of equity shares - denial on the ground that the services rendered is not fall under the category of input services and they were not in relation to the manufacturing of the final products - Held that - when the amounts raised by M/s PL Advisory Service Pvt. Ltd. were undisputedly used by appellant for the manufacturing activity i.e. for the business during the relevant period is itself an indicator that the said services rendered by M/s PL Advisory Service Pvt. Ltd. has intrinsic relation to the manufacture of business activity of the appellant. The decision of the Tribunal in the case of Hinduja Global Solution 2016 (3) TMI 401 - CESTAT BANGALORE would directly apply in the case in hand wherein the Tribunal has held that activities relating to business which is in the second portion of the definition includes the activity of financing which would mean that if an assessee pays service tax for the various services received by them for raising the finance, CENVAT credit can be availed. Credit allowed - decided in favor of appellant.

Summary

Issues:
- Availment of CENVAT credit on service tax paid on advisory and placement charges for private placement of equity shares under 'Banking & Other Financial Services'

Analysis:
The issue in this case revolves around the eligibility of CENVAT credit on service tax paid for services provided by a company under 'Banking & Other Financial Services' category for private placement of equity shares. The appellant claimed CENVAT credit on the service tax paid to M/s PL Advisory Services Pvt. Ltd. for advisory and placement charges related to equity shares issued in January 2007. The Revenue contended that such credit is not eligible as the services provided were not directly related to manufacturing final products and were rendered to the appellant's head office for distribution to various manufacturing units.

The appellant relied on previous Tribunal decisions and High Court judgments to support their claim for CENVAT credit. They argued that the services provided fell under the definition of 'input services' as per Cenvat Credit Rules, 2004, and were integral to the appellant's business activities. The appellant also highlighted that the funds raised through the equity shares were used for manufacturing activities, establishing a direct link between the services rendered and the business operations.

After considering the submissions from both sides, the Member (Judicial) found that the issue was narrow in scope. The Member observed that the services provided by M/s PL Advisory Services Pvt. Ltd. were utilized for raising funds for the appellant's manufacturing activity, indicating a direct connection between the services and the business operations. The Member referenced the Tribunal's decision in the case of Hinduja Global Solution to support the appellant's claim for CENVAT credit on services related to business activities.

The Member disagreed with the Revenue's reliance on a High Court judgment in a different context, emphasizing the distinctions in the facts of the present case. Ultimately, the Member held that the impugned order denying CENVAT credit was unsustainable and set it aside, allowing the appeal with consequential relief. The decision underscored the importance of establishing a nexus between input services and business activities to determine the eligibility for CENVAT credit, emphasizing the broad and inclusive definition of 'input services' under the Cenvat Credit Rules, 2004.