2016 (3) TMI 401 - AT - Service Tax

Appellant allowed CENVAT credit on service tax for business expansion

The Tribunal held that the appellant correctly availed CENVAT credit on service tax paid for services related to raising finance for business expansion, ... CENVAT credit - Scope of input services - Input services received at their Head Office and subsequently distributed to the appellant herein - Input Service Distributor (ISD) - procedure not followed - Held that:- The plain reading of the definition of input services (as hereinabove reproduced) indicate that the activities relating to business which is in the second portion of the definition includes the activity of financing which would mean that if an assessee pays service tax for the various services received by them for raising the finance, CENVAT credit can be availed. In our considered view, the CENVAT credit availed by the appellant or service tax paid cannot be disputed. We find nothing on record to indicate that Head Office of the appellant was issued a show-cause notice denying them such CENVAT credit. In the absence of any doubt raised as to the eligibility to avail the CENVAT credit at their Head Office, the recipient unit, cannot be asked to explain the nexus of such credit to the output service provided by them. As regards the dispute raised in the impugned order as to eligibility to avail the CENVAT credit on the invoices raised by the ISD for the services received prior to the registration of the Head Office as an Input Service Distributor, it is held that such credit can be availed. Demand set aside - Decided in favor of assessee. Issues Involved:1. Whether the appellant correctly availed CENVAT credit on service tax paid for services received by their Head Office.2. Whether the services received for raising finance for business expansion qualify as input services under Rule 2(l) of the CENVAT Credit Rules, 2004.3. Whether the CENVAT credit can be availed on invoices received prior to the registration of the Head Office as an Input Service Distributor (ISD).4. Whether the show-cause notice was issued within the limitation period.Detailed Analysis:1. Correct Availment of CENVAT Credit:The primary issue is whether the appellant correctly availed CENVAT credit on the service tax paid on services received by their Head Office for disinvestments. The appellant argued that these services were essential for raising capital for business expansion, which falls under the definition of 'input service' as per Rule 2(l) of the CENVAT Credit Rules, 2004. The adjudicating authority disagreed, leading to the confirmation of demands with interest and penalties.2. Definition of Input Services:The definition of 'input service' under Rule 2(l) includes services used directly or indirectly in relation to the business activities such as financing, which the appellant claimed. The Tribunal noted that the services received for raising finance were indeed related to the business expansion of the appellant. The appellant's Head Office, registered as an ISD, had distributed the CENVAT credit correctly. The Tribunal cited precedents like GMR Industries and Aditya Birla Nuvo Ltd., supporting the view that services used for business activities qualify for CENVAT credit.3. Invoices Prior to ISD Registration:The Tribunal addressed the issue of whether CENVAT credit can be availed on invoices received prior to the registration of the Head Office as an ISD. Citing the Precision Wire India Ltd. case, the Tribunal held that such credit can be availed, as the receipt of input services at the head office and their distribution to various units, including the appellant's factory, was undisputed.4. Limitation Period:The appellant contested the show-cause notice on the grounds of limitation, arguing that the credit was availed in 2006 while the notice was issued in 2009. They had disclosed the credits in their returns, and no notice was issued to their Head Office questioning the credit availed and distributed. Since the Tribunal decided the appeal on merits, it did not record findings on the limitation issue.Conclusion:The Tribunal concluded that the appellant correctly availed CENVAT credit on the service tax paid for services related to raising finance for business expansion. The services qualified as 'input services' under Rule 2(l) of the CENVAT Credit Rules, 2004. The Tribunal also upheld that CENVAT credit could be availed on invoices received prior to ISD registration. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.