2013 (12) TMI 487 - AT - Service Tax

Demand of CENVAT Credit - Service of preparing techno feasibility report regarding rehabilitation - Stay application - Held that - The service of preparing feasibility report for rehabilitation of the company had been received by the appellant from M/s. SBI Capital in terms of the directions of the BIFR. Without such feasibility report from the M/s. SBI Capital rehabilitation package could not be finalized by the BIFR. Therefore, the service received by the appellant from SBI Capital has very much nexus with their manufacturing business and is covered by the term activities relating to business in the inclusive part of the definition of input service , as given in Rule 2(l) - Stay granted.

Issues:
1. Whether the service of preparing a feasibility report for rehabilitation received by the appellant from a company is covered under the definition of 'input service' for Cenvat credit.
2. Whether the Cenvat credit demand, interest, and penalty imposed by the Jurisdictional Assistant Commissioner are valid.
3. Whether the requirement of pre-deposit for hearing the appeal should be waived.

Analysis:
1. The appellant, a manufacturer of paints and varnishes, received a feasibility report for rehabilitation from M/s. SBI Capital as per the BIFR's directions. The report was crucial for finalizing the rehabilitation package. The appellant argued that the services from M/s. SBI Capital had a clear nexus with their manufacturing business and should be considered "activities relating to business" under the definition of 'input services.' The Tribunal agreed, stating that without the feasibility report, the rehabilitation package could not be finalized. Therefore, the service received by the appellant is covered by the definition of 'input service.' The requirement of pre-deposit for Cenvat credit demand, interest, and penalty was waived, and recovery stayed until the appeal's disposal.

2. The Jurisdictional Assistant Commissioner had confirmed a Cenvat credit demand of Rs. 2,56,361/- along with interest and imposed a penalty of an equal amount. The Commissioner (Appeals) upheld this decision. However, the Tribunal, upon considering the submissions and records, found that the service received by the appellant from M/s. SBI Capital was indeed covered under 'input services.' Therefore, the Tribunal allowed the appeal, waived the pre-deposit requirement, and stayed the recovery until the appeal's finalization.

3. The appellant's plea for waiver of pre-deposit was opposed by the Senior Departmental Representative, who argued that the service received was a financial service not covered by the definition of 'input service.' However, the Tribunal disagreed, emphasizing the nexus between the service and the appellant's manufacturing business. As a result, the Tribunal allowed the waiver of the pre-deposit requirement for hearing the appeal, stating that the service from M/s. SBI Capital falls under 'activities relating to business' as per the definition of 'input service.'

In conclusion, the Tribunal ruled in favor of the appellant, determining that the service of preparing the feasibility report for rehabilitation received from M/s. SBI Capital is covered under the definition of 'input service.' The requirement of pre-deposit for Cenvat credit demand, interest, and penalty was waived, and recovery stayed until the appeal's disposal.

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