2014 (1) TMI 55 - AT - Central Excise

Tribunal overturns denial of credit for banking services, deems them 'input service' under Rule 2(l)

LUPIN LTD Versus COMMISSIONER OF CENTRAL EXCISE & ST (LTU)

The tribunal ruled in favor of the appellant, overturning the denial of credit for banking and financial services and business auxiliary services. The ... Services in relation to manufacture of goods OR not - Denial of credit on banking and financial services and business auxiliary services – Held that:- The appellant paid the service tax as recipient of service under the reverse charge mechanism in respect of banking and financial services and business auxiliary service - There is no evidence on record to show that these services are not in relation to the goods manufactured and exported by the appellant - The services are specifically covered under the definition of ‘input service' – there was merit in assessee’s contention – order set aside – decided in favour of Assessee. Issues:- Denial of credit for banking and financial services and business auxiliary services in relation to the manufacture of goods.Analysis:The appellant filed an appeal against an adjudication order denying credit of Rs.1,89,48,776/- for banking and financial services and business auxiliary services, contending that these services were related to the manufacture of bulk drugs falling under Chapter 49 of the Central Excise Tariff. The appellant exported bulk drugs and availed banking and financial services from foreign banks for collecting and remitting sale proceeds. Additionally, the appellant paid commission to foreign agents for obtaining export orders and incurred expenses for sales promotion activities outsourced abroad. The appellant argued that these services were essential for the promotion and enhancement of their sales abroad, falling under business auxiliary services and eligible for credit as per the definition of 'input service' under Rule 2(l).The Revenue opposed the appellant's claim, stating that the input services were not directly or indirectly used in the manufacture of final products and were availed after goods clearance, justifying the denial of credit. However, the tribunal analyzed the definition of 'input service' under Rule 2(l) and noted that the appellant paid service tax as a recipient under the reverse charge mechanism for banking and financial services and business auxiliary services. The tribunal found no evidence indicating that these services were not related to the goods manufactured and exported by the appellant. As the services in question fell within the definition of 'input service,' the tribunal upheld the appellant's contention, set aside the impugned order, and allowed the appeal, granting consequential relief as per the law.In conclusion, the tribunal ruled in favor of the appellant, overturning the denial of credit for banking and financial services and business auxiliary services, as these services were deemed to be in relation to the manufacture and export of goods, meeting the criteria of 'input service' as defined under Rule 2(l).