2018 (11) TMI 813 - AT - Central Excise

CENVAT Credit - input services - Clearing & Forwarding domestic supply services - travel agents service - professional (management consultancy) service - Held that - The category of service provided by McKinsey & Co. is management consultancy service. Though it is termed that professional fees is collected by the service provider, it is very much clear that these are services in relation to after-market acceleration, which indicates that these are services for market analysis. The said services fall within the inclusive part of the definition - the disallowance of credit on such services is not justified. The impugned order requires to be modified to the extent of allowing the credit in respect of professional (management consultancy) service availed for market analysis service - appeal allowed in part.

Summary

Issues: Availment of CENVAT credit on Clearing & Forwarding domestic supply, travel agents service, and professional (management consultancy) services.

Analysis:

1. The appellants were availing the facility of CENVAT credit on various input services, including Clearing & Forwarding domestic supply, travel agents service, and professional (management consultancy) services from April 2015 to June 2015. The department contended that the appellants were not eligible for input tax credit on these services, leading to a show cause notice being issued to demand wrongly availed credit, interest, and penalties. The original authority and the Commissioner (Appeals) upheld the demand and penalties, prompting the appeal.

2. The appellant, through their counsel, conceded to not pressing the issue regarding C&F services for domestic supplies and the credit disallowed on travel agents service. However, they contested the disallowance of credit on professional (management consultancy) services for market analysis, specifically an amount paid to M/s. McKinsey & Co. The counsel argued that the services were utilized for product manufacturing, supported by invoices, and highlighted a similar allowance in a subsequent period in their own case.

3. The appellant's counsel presented the invoice from M/s. McKinsey & Co., demonstrating that the services provided fell under management consultancy service for market analysis. Despite the service provider terming it as professional fees, the nature of the services indicated they were for market analysis, falling within the inclusive part of the definition. The counsel referenced an order-in-original in the appellant's own case where credit for the same services was permitted for a subsequent period, emphasizing the justification for allowing the credit in this instance.

4. After hearing both sides, the Tribunal acknowledged the appellant's decision to not pursue the issues related to C&F services and travel agents service. However, regarding the professional (management consultancy) service for market analysis, the Tribunal found in favor of the appellant. The Tribunal concluded that the disallowance of credit on these services was unjustified, given the nature of the services and the precedent set in the appellant's own case. Consequently, the appeal was partly allowed, modifying the impugned order to permit the credit for professional services availed for market analysis, with consequential relief granted as necessary.