Input service dispute over advertisement s: complete pre-deposit waiver declined, with partial deposit ordered pending appeal.

Advertisement expenses incurred for mutual fund schemes were not shown, at the prima facie stage, to satisfy the definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004 for the appellant's financial advisory and asset management output service. The tribunal noted that the advertisements appeared to relate to the mutual fund schemes and that the appellant acted as a pure agent for those expenses, so complete waiver of pre-deposit was declined. The appellant was directed to deposit Rs. 25,00,000; on such deposit, the balance demand, interest and penalty were waived and recovery stayed during the appeal. The limitation plea was kept open for final hearing.

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Issues: Whether the appellant had made out a prima facie case for complete waiver of pre-deposit in respect of the disputed CENVAT credit availed on advertisement expenses treated as input service.

Analysis: The dispute turned on whether advertisement expenses incurred in connection with mutual fund schemes could be regarded as input service for the appellant's output service of financial advisory/asset management. The definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004 requires use of the service for providing an output service. The record indicated that the advertisements were incurred for the mutual fund schemes and that the appellant acted in the capacity of a pure agent in relation to such expenses. At the interim stage, the claim that the expenses constituted input service was not strong enough to justify total waiver. The plea on limitation was left for consideration at the appeal hearing.

Conclusion: Complete waiver of pre-deposit was declined. The appellant was directed to deposit Rs. 25,00,000, and on such deposit the balance demand, interest, and penalty were waived and recovery stayed during the pendency of the appeal.

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