2015 (11) TMI 1556 - AT - Service Tax

Tribunal grants appeal for Cenvat credit in service tax dispute, stresses direct connection

Jyothy Laboratories Ltd. Versus Commissioner of Central Excise, Puducherry

The Tribunal allowed the appeal in favor of the appellant in a dispute over entitlement to Cenvat credit for service tax paid through an intermediary for ... Cenvat credit - Service tax paid to the intermediary to avail service of broadcasting by it for advertisement of its product - Held that:- What that is requirement of law is that there should be an integral connection with the activity of the appellant and the input service availed. Such a nexus is established in this case for which the appellant cannot be denied of benefit of Cenvat credit of the service tax paid. - Decided in favour of appellant Issues:1. Dispute over entitlement to Cenvat credit for service tax paid through an intermediary for broadcasting service.Analysis:The appellant availed broadcasting service and paid service tax based on an invoice raised by an intermediary who arranged the service. The Revenue disputed this arrangement, arguing that the appellant cannot claim Cenvat credit for the tax paid by the intermediary. The appellant contended that the identity of the arranger is irrelevant; what matters is whether the service provided to the appellant is taxable. The appellant asserted its entitlement to Cenvat credit for the tax paid to the intermediary for broadcasting services used to advertise its products.The Revenue's position was that the appellant should have directly arranged for the taxable service without involving an intermediary. Consequently, the Revenue insisted that the appellant must bear the tax liability along with penalties for using the intermediary's services.After hearing both parties and examining the records, the Tribunal found that the services availed by the appellant were integral to its business operations. The advertisement broadcasted for the appellant was not disputed by the Revenue. The crucial legal requirement was establishing a direct connection between the appellant's activities and the input services obtained. In this case, such a nexus was evident, justifying the appellant's right to claim Cenvat credit for the service tax paid through the intermediary.Therefore, the Tribunal allowed the appeal, ruling in favor of the appellant. The judgment emphasized the importance of the nexus between the appellant's business activities and the input services availed to determine the eligibility for Cenvat credit.