2018 (6) TMI 635 - AT - Central Excise

CENVAT credit - various input services - Management Consultancy Services - Department was of the view that the appellants are not eligible to avail credit on the management consultancy services as these services do not have nexus with the manufacturing activity - the period involved is 2008 - Held that - The Tribunal in the case of Tamilnadu Petroproducts 2016 (12) TMI 858 - CESTAT CHENNAI has observed that since financing finds a mention in the list of examples given in Rule 2(l), such services definitely would fall within the definition of input services and could be eligible for credit. The appellants have availed the services of M/s. Ambit Corporate Finance Ltd. for the purposes of selling their automotive component division to raise funds. Raising funds is nothing but obtaining finance for the appellant-company. Such activity is definitely integrally connected to the manufacturing activity of the company. In any case, it would fall within the cover of activities relating to business of manufacture. Denial of credit unjustified - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility of CENVAT credit on management consultancy services for restructuring manufacturing activities.

Analysis:
The case involved a dispute regarding the eligibility of CENVAT credit on management consultancy services utilized for restructuring manufacturing activities. The appellant, engaged in manufacturing plastic articles, sought CENVAT credit for service tax paid on input services, including management consultancy services provided by M/s. Ambit Corporate Finance Ltd. The restructuring involved transferring manufacturing units to another company based on the consultancy advice. The department contended that the consultancy services lacked nexus with manufacturing activities, leading to show cause notices and subsequent confirmation of demand, interest, and penalties by the original authority and Commissioner (Appeals).

The appellant argued that the consultancy services were availed to raise funds for the manufacturing business, citing the Tribunal's decision in a similar case where credit for financial consultancy services was allowed. The appellant emphasized that raising funds constituted a financing activity integral to the manufacturing process. Additionally, the appellant highlighted that a similar show cause notice issued to the Faridabad unit was set aside by the Commissioner (Appeals) without any appeal from the department, suggesting the validity of the credit availed.

On the other hand, the respondent supported the lower authorities' decision, asserting that the consultancy services lacked a connection with manufacturing activities. The respondent relied on precedent cases to argue against the eligibility of credit for activities unrelated to manufacturing, emphasizing the importance of nexus between services and manufacturing operations.

After considering the arguments, the Tribunal analyzed the case in the context of the definition of input services applicable during the relevant period. The Tribunal noted that the definition encompassed activities relating to business and explicitly mentioned financing. Referring to a prior case, the Tribunal concluded that financing services fell within the definition of input services eligible for credit. The Tribunal found that the consultancy services aimed at raising funds for the manufacturing division constituted an integral part of the business activities, justifying the credit availed by the appellant.

In light of the discussions, the Tribunal deemed the denial of credit unjustified, setting aside the impugned order and allowing the appeal with any consequential relief. The judgment emphasized the integral connection between the consultancy services for raising funds and the manufacturing business, establishing the eligibility of the appellant for CENVAT credit on the services utilized for restructuring activities.