2017 (5) TMI 621 - AT - Central Excise

CENVAT credit - Banking and Other Financial Services - Legal Consultancy Services - commission towards foreign remittance - scope of the definition of Input Service as laid down u/r 2(l) of CCR, 2004 - Held that - the Service Tax paid on commissions towards foreign remittance is eligible to Cenvat Credit in view of the judgment of this Tribunal in the case of Meghmani Dyes & Intermediates 2014 (1) TMI 558 - CESTAT AHMEDABAD , where it was held that definition covers not only services used directly or indirectly in or in relation to manufacture of final products but also various services used in relation to business of manufacture whether prior to manufacture or after manufacture. Needless to say banking charges are paid in relation to purchase of raw materials and sale of finished goods and therefore such services is definitely relatable to the manufacture - credit allowed. Banking and Financial Service - Held that - in all the bills Service Tax was paid on the Banking Commission charges in relation to foreign remittance and nowhere the charges in the said bills were collected relating to forward contract entered into between the appellant and the Bank. In these circumstances, the Service Tax paid on Commission Charge on foreign remittance is eligible to Cenvat Credit under the category of Banking and Forward Services. With regard to Cenvat Credit availed on Legal Service, the issue is more of less covered by the Judgment of Hon ble Allahabad High Court in the case of CCE vs HCL Technologies Ltd 2014 (11) TMI 663 - ALLAHABAD HIGH COURT , where it was held that the service was governed by the definition of input service - credit allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility of Cenvat Credit on Service Tax paid on Banking and Financial Services
- Eligibility of Cenvat Credit on Legal Consultancy Services

Analysis:
The appeals were filed against OIAs passed by the Commissioner, Central Excise (Appeals) involving common issues. The appellant availed Cenvat Credit of Service Tax paid on services including Banking and Financial Services and Legal Consultancy Services from December 2010 to June 2014. Show Cause Notices were issued challenging the eligibility of these services as Input Services under Rule 2(l) of Cenvat Credit Rules, 2004. The demands were confirmed with interest and penalties by the adjudicating authority, which the appellants unsuccessfully challenged before the Ld Commissioner (Appeals), leading to the present appeals.

The Ld Advocate for the appellant argued that commission paid on foreign remittance falls under the definition of Input Service as per Rule 2(l) of Cenvat Credit Rules, 2004. He cited tribunal decisions to support this claim and differentiated between charges related to foreign remittance and charges under forward contracts. Regarding the Cenvat Credit on Legal Services, the Ld Advocate contended that the charges were incurred in pursuing litigation abroad related to their business activities, making them eligible for credit. He referenced a decision of the Hon’ble Allahabad High Court to support this argument.

On the contrary, the Ld Authorized Representative for the Revenue supported the findings of the Ld Commissioner (Appeals), stating that the appellant failed to provide sufficient documentary evidence to prove that the CENVAT credit availed was for Service Tax paid on commission charges for foreign remittances. After hearing both sides and examining the records, the Tribunal found that Service Tax paid on commission charges for foreign remittances is eligible for Cenvat Credit under "Banking and Forward Services." The Tribunal also noted that the issue of Cenvat Credit on Legal Services aligns with the judgment of the Hon’ble Allahabad High Court in a specific case. Consequently, the impugned orders were set aside, and the appeals were allowed with any consequential relief as per the law.