2017 (6) TMI 886 - AT - Service Tax

Distribution of CENVAT credit - Input service - technical consultancy fee - denial on account of nexus - Rule 7 of Cenvat Credit Rules - Held that - the issue involved in the present case is squarely covered in favour of the appellant by the judgments in the case of Commissioner of Central Excise, Bangalore-I Commissionerate Versus Ecof Industries (P.) Ltd. 2011 (4) TMI 560 - KARNATAKA HIGH COURT , where it was held that The finding recorded by the Appellate Authority that the assessee is entitled to take credit only in the unit where the product is manufactured is therefore not the mandate of Rule 7 of the Cenvat Credit Rules - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
- Availment of input service tax credit on technical consultancy fee without relevance to manufacturing activity.
- Interpretation of the definition of input service under Rule 2(l) of Cenvat Credit Rules.
- Compliance with Rule 7 of Cenvat Credit Rules regarding availment and utilization of credit.
- Application of Rule 9 of Cenvat Credit Rules on maintenance of accounts and records.
- Distribution of credit by an input service distributor to different units.

Analysis:
1. The appeal challenged an order disallowing input service tax credit of ?2,98,674 for the period 2010-11 on technical consultancy fee, alleging it had no relevance to manufacturing activity. The appellant, engaged in manufacturing biotechnology products, argued that the consultancy services had a direct nexus with manufacturing and fell within the broad definition of input service under Rule 2(l) of Cenvat Credit Rules, covering services used directly or indirectly in or in relation to the manufacture of final products.

2. The appellant contended that the impugned order contravened legal provisions and ignored judicial precedents, emphasizing that Scientific and Technical Consultancy Services were not excluded from input services. Referring to a Consultancy Agreement with a German company, the appellant highlighted various aspects of manufacturing activities supported by the consultancy services, asserting compliance with Rule 9 of Cenvat Credit Rules on maintenance of accounts and records.

3. The appellant argued that Rule 7 of Cenvat Credit Rules did not prohibit the distribution of credit by an input service distributor to different units, citing relevant authorities to support this claim. The appellant also maintained that the credit availed was based on proper documents and invoices, in conformity with Rule 9 of Cenvat Credit Rules, and that there were no restrictions on availment and utilization of credit as long as Rule 7 was not violated.

4. The Appellate Tribunal, after hearing both parties and considering the judgments cited, found in favor of the appellant. The Tribunal held that the issue was squarely covered in favor of the appellant by the cited judgments, allowing the appeal and setting aside the impugned order with consequential relief. The decision emphasized the broad interpretation of input services and the compliance with relevant rules in availing and utilizing credit.

This comprehensive analysis highlights the key arguments, legal provisions, and the Tribunal's decision in favor of the appellant regarding the availment of input service tax credit on technical consultancy fee and related compliance issues under the Cenvat Credit Rules.