2016 (11) TMI 992 - AT - Central Excise

Cenvat Credit - input services - payment rendered to M/s.Amas Bank for raising funds through GDRs for USD Million during April 2008 - Rule 2 (l) of the CENVAT Credit Rules 2004 - Held that - the onus is on the department to seek a clarification or verify the details submitted by the appellants in their ER-I returns, cannot be faulted and the further finding that the proviso to extended period cannot be invoked is proper. The reliance on the Tribunal ruling in the case of Sundram Brake Linings Ltd is no longer good law and the same stands overruled by the Madras High Court in CMA No.314/2011 dated 13.02.2015. The appellant has failed to note that without capital expenditure, the proposed foundries would not have been established and to augment funds through GDRs, the Respondent had availed the services of M/s. Amas Bank. The definition of input service is of the widest amplitude in as much as the wording is used by a manufacturer whether directly or indirectly . The inclusive definition has been held by various courts to be expansive and the services used in relation to setting up of the factory. Modernization and renovation are held to be eligible for input service credit. The wordings relating to business is also very apt for the factual scenario in this case in as much as the funds were used for setting up of two units which has not been disputed by the Revenue, I do not find any infirmity in the impugned order and in view of the observations made herein above, the impugned order is upheld - appeal dismissed - decided against Revenue.

Summary

Issues involved:
- Entitlement to input service credit under "Business Auxiliary Service" under reverse charge mechanism.

Analysis:
1. Facts of the case: The respondent, a manufacturer of cast articles, faced a demand for service tax credit availed and utilized for establishing new units. The dispute arose from the funding of these units through GDRs issued by the respondent, involving services from an entity outside India.

2. Adjudication: The adjudicating authority denied the credit, imposed penalties, and upheld the demand. The respondent contested, arguing that the service tax was paid for activities related to business expansion, reflected in returns, and should be eligible for credit.

3. Appeal before Commissioner (Appeals): The Commissioner ruled in favor of the respondent, holding that the service received should be treated as an input service, and limitations on credit were not applicable. The appellant (revenue) challenged this decision, citing precedents and lack of nexus between credit availed and manufacturing activities.

4. Tribunal's decision: The Tribunal analyzed the definition of input service under CENVAT Credit Rules 2004 and upheld the Commissioner's decision. It emphasized the wide scope of input services, including those indirectly related to manufacturing, and the importance of capital expenditure for establishing new units. The Tribunal found no fault in the Commissioner's order and dismissed the revenue's appeal.

5. Conclusion: The Tribunal's decision affirmed the eligibility of the respondent for input service credit under the reverse charge mechanism for services related to business expansion through GDR funding. The ruling highlighted the inclusive nature of input services and the significance of capital expenditure for establishing new manufacturing units.