2014 (10) TMI 331 - AT - Service Tax

Appellant's Techno-Economic Feasibility Report Qualifies as Input Service under Cenvat Credit Rules

JENSON & NICHOLSON (INDIA) LTD. Versus COMMISSIONER OF C. EX., NOIDA

The service of preparing a techno-economic feasibility report for rehabilitation, received by the appellant from SSI Capital, was deemed to qualify as an ... Denial of CENVAT credit - Input service - service of preparing Techno-Economic feasibility of rehabilitation of the factory proposed by BIFR had been received by the appellant from SSI Capital in terms of the order of the BIFR - Held that:- The appellant had filed an application before BIFR and in term of BIFR’s orders had got a study conducted by SBI Capital regarding techno-economic feasibility of rehabilitation and modalities of finance. Without such feasibility report from the SBI Caps, it was not possible for the BIFR to finalize the rehabilitation package for the appellant. In my view, therefore, the service received by the appellant from SBI Caps has nexus with their manufacturing business and would be covered by the terms ‘activities’ relating to business. In view of this, I hold that impugned order denying Cenvat credit in respect of the service in question not sustainable - Decided in favour of assessee. Issues:1. Whether the service of preparing Techno-Economic feasibility of rehabilitation of the factory, received by the appellant from SSI Capital, qualifies as an 'input service' under the Cenvat Credit Rules, 2004.Analysis:The case involved a dispute regarding the eligibility of a service received by the appellant from SSI Capital for preparing a techno-economic feasibility report for rehabilitation, to be classified as an 'input service' under the Cenvat Credit Rules, 2004. The appellant, a manufacturer of paints and varnishes, had two of its factories closed down and sought rehabilitation through BIFR. SBI Capital conducted a study as per BIFR's orders, and the service tax paid on the amount charged for this service was taken as credit by the appellant. The Jurisdictional Assistant Commissioner, however, denied the Cenvat credit, leading to an appeal.The appellant contended that the service of preparing the feasibility report was essential for the rehabilitation process as directed by BIFR, and therefore, should be considered a financial service falling under the definition of 'input service'. The appellant argued that the services received were related to the business activities and should be covered under the definition of 'input service'. On the other hand, the Departmental Representative defended the denial of the credit, stating that the service did not meet the criteria outlined in Rule 2(l) of the Cenvat Credit Rules, 2004.After hearing both sides and examining the records, the Member (T) concluded that the service provided by SBI Capital had a direct connection with the appellant's manufacturing business. The feasibility report was crucial for finalizing the rehabilitation package as per BIFR's directives. Therefore, the service fell under the category of 'activities relating to business' and should be considered an 'input service'. Consequently, the impugned order denying the Cenvat credit was deemed unsustainable, and the appeal was allowed, setting aside the earlier decision.In summary, the judgment clarified that the service of preparing a techno-economic feasibility report for rehabilitation, received by the appellant from SSI Capital, qualified as an 'input service' under the Cenvat Credit Rules, 2004, as it was directly linked to the appellant's manufacturing business activities and was essential for the rehabilitation process directed by BIFR.