Tribunal Upholds Denial of Cenvat Credit for Corporate Restructuring Services

The Tribunal dismissed the appeal by S.H. Kelkar & Co. Ltd. regarding the denial of cenvat credit on services used for corporate restructuring through a merger. The services were not considered as input services under the Cenvat Credit Rules, as they were found to be for corporate restructuring rather than falling under specific categories like accounting, financing, or legal services. The Tribunal upheld the demand for service tax paid for these services related to the merger, amounting to Rs. 2,89,018.

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Issues: Denial of Cenvat credit on certain services.

In the present case, the appellants, S.H. Kelkar & Co. Ltd., appealed against the denial of cenvat credit on certain services. The audit raised objections regarding the cenvat credit availed for services related to handling a case on family settlement and services on the issue of merger with two other companies. The appellants admitted and reversed the credit related to family settlement services. However, a show-cause notice demanded reversal of cenvat credit amounting to Rs. 4,53,818 for services used in family settlement. The adjudication process allowed a cenvat credit of Rs. 1.64 lakhs and upheld a demand of Rs. 2,89,018 as service tax paid for services received for family settlement. The appellants contended that the services were not used for family settlement but for restructuring through a merger. The invoice and Letter of Engagement (LOE) described the services as professional services for advising and implementing a group structure realignment, not related to family settlement. The appellants argued that the services fell under legal, accounting, and financing services categories. The Tribunal analyzed the definition of input services post-April 2011 and concluded that the services for merger did not qualify as input services under the Cenvat Credit Rules. The services were deemed to be for corporate restructuring, not falling under any specific category of input services like accounting, financing, or legal services. Therefore, the Tribunal dismissed the appeal, finding no merit in the argument presented by the appellants.

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