2014 (1) TMI 718 - AT - Service Tax

Banking services eligible for cenvat credit; debit advices valid despite timing. Tribunal rules for appellant.

MPI MACHINES LTD Versus COMMISSIONER OF CENTRAL EXCISE, INDORE

The Tribunal ruled in favor of the appellant, holding that banking services like guarantees and letters of credit are eligible as input services for ... Eligibility of the banking services – Held that:- The services are integrally connected with the manufacturing business of an assessee and hence have to be treated as covered by the expression 'activities relating to business' in the definition of input service as given in Rule 2(1) of the Cenvat Credit Rules – thus, the services availed by the appellant from the bank are eligible for cenvat credit. Validity of the documents - the debit advices issued by the bank for different periods contain the name and address of the bank, service tax registration no, period during which services were provided, the nature of the service, amount charged for the services along with service tax and education cess - Thus, the debit advices issued by the bank on the basis of which cenvat credit has been taken, contain all the information which is required to be included in an invoice - the debit advices have to be treated as valid documents for cenvat credit - Just because these advices were not issued by the bank within a period of 15 days from the date of providing the service, the cenvat credit cannot be denied to the appellant – following Vimal Enterprises Vs. Union of India [2005 (7) TMI 111 - HIGH COURT OF GUJARAT AT AHMEDABAD] - the cenvat credit cannot be denied to an assessee for faults for which he is not responsible – Decided in favour of Assessee. Issues Involved:1. Eligibility of banking services as input services for cenvat credit.2. Validity of documents for availing cenvat credit.Analysis:Issue 1: Eligibility of Banking Services as Input Services:The appellant, a manufacturer of machinery and machinery parts, availed banking services like issue of guarantee, letter of credit, etc., from their bank. The department contended that these services were not eligible as input services under Rule 2(1) of the Cenvat Credit Rules. The Asstt. Commissioner confirmed the cenvat credit demand, but the Commissioner (Appeals) upheld the decision. The appellant argued that banking and financial services are integral to their business activities and fall under the definition of input services. The Tribunal agreed, stating that these services are connected to the manufacturing business and are covered by the expression 'activities relating to business' in the Cenvat Credit Rules. Therefore, the services availed by the appellant from the bank were deemed eligible for cenvat credit.Issue 2: Validity of Documents for Cenvat Credit:The dispute also revolved around the validity of the documents, specifically the debit advices issued by the bank. The department argued that since the debit advices were not issued within 15 days from the date of providing the service, they could not be considered valid documents for availing cenvat credit. The appellant relied on a judgment of the Hon'ble Gujarat High Court, stating that cenvat credit cannot be denied for faults not attributable to the assessee. The Tribunal examined the debit advices and found that they contained all necessary information required for an invoice, including details of the service provider, service tax registration number, nature of service, and fees charged with service tax and education cess. Therefore, the Tribunal deemed the debit advices as valid documents for availing cenvat credit, setting aside the impugned order and allowing the appeal.In conclusion, the Tribunal ruled in favor of the appellant, holding that the banking services availed by them were eligible as input services for cenvat credit. Additionally, the debit advices issued by the bank were considered valid documents despite not being issued within the specified timeframe, as they contained all essential information required for availing cenvat credit. The impugned order was set aside, and the appeal was allowed.