TaxTMI 
TaxTMI 
2026 (6) TMI 9
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....ed as corporate agents for various insurance /mutual fund companies and were providing insurance auxiliary / mutual fund distribution services to them. For this purpose, they were availing man power services provided by two firms, namely, M/s. Aparajitha Corporate Services Pvt. Ltd. and M/s. Aparajitha Dynamic Synergies (P) Ltd. and were also availing credit of the service tax paid by them on the said services under the Cenvat Credit Rules, 2004 (CCR). It was alleged that the appellant was using these man power services not for the regular business, but exclusively in the provision of mutual fund distribution services / insurance auxiliary services rendered by them on which the service tax was paid by the service recipient Insurance Companies under reverse charge mechanism. 3. The Department was of the view that on a plain reading of the definition of input service as defined under Rule 2 (l) of the CCR, for a service to qualify as an eligible input service, it should be used by a provider of output service (taxable service) for providing their main output service. Since it appeared that the appellant is not using the impugned manpower services for providing their regular taxabl....
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.... the ambit of definition of 'input services' under Rule 2(l) of the CCR in so far as the appellant was concerned as the appellant was not discharging any service tax on the insurance auxiliary service. Further, Explanation III under Rule 6(3) of the CCR clearly states that no cenvat credit shall be taken on the tax paid on any services that are not input services. Further, from 01-072012, the services rendered by mutual fund distributors / agents to a mutual fund company or asset management Company were exempted from payment of service tax vide sl.no.29 of Notification No.25/2012 service tax, dated 20.06.2012. The Department was also of the view that as per Rule 6(1) of the CCR read with explanation II to the said Rule, credit shall not be allowed on input services used exclusively in relation to exempted services and therefore in the instant case since the man power services were used by the appellant exclusively for providing mutual fund distribution services that were fully exempted in terms of Notification No.25/2012, the credit of input service availed on the man power services was hit by the bar as per Rule 6 (1) of the CCR read with explanation II of the said Rule. Such cred....
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....unal at Chennai and thus the reversal in respect of the manpower services for the period 2010-11 is sub-judice. It was further contended that from 01.04.2011 Rule 6(3B) came into play which began with a non-obstante clause stipulating "Notwithstanding anything contained in sub-rules (1)(2)(3)", and according to which in the case of Banks and NBFCs could reverse a flat 50% of the credit availed on input services irrespective of their use for exempted or non-taxable output services. Placing reliance on the TRU Circular D.O.F.No.334/3/2011-TRU dated 28th February 2011, and case laws on the meaning of non-obstante clause, in Brij Rai Krishna v. S.K. Shaw and Brothers, AIR 1951 SC 115 and K. Parasuramiah v. Pokurl Lakshmamma, AIR 1965 AP 220, it was contended that the appellant had rightly availed the credit. After due process of law, the Adjudicating authority after causing verification from the jurisdictional Superintendent as regards the appellant's contention that the demand pertaining to the period 2010-11 for which SCN was issued included the credit taken on the manpower services availed from the aforementioned agencies, accepted the appellant's contention and confined the demand ....
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.... introduce a lump sum reversal of CENVAT credit of 50% of the total credit in Rule 6(3B) of the CCR for NBFCs/Banks and thus there is a permissible inference that legislature has deemed to have included all the CENVAT credit attributable to the not-taxable and exempted output service and also the taxable service on which the recipient of service of the NBFC/Bank are liable to pay the tax wholly, within the fold of the 50% reversal of cenvat credit. It is contended that Rule 6 (3B) of CCR overrides the provisions of Rule 6 (1), (2) and (3) of CCR as well as the explanation II and III of Rule 6 (3). Reliance is placed on the decisions in Union of India Vs. G.M. Kokil 1984 (Supp) SC 196 / AIR 1984 SC 1022, Emcure Pharmaceuticals Ltd. Vs. Commissioner of C.Ex. Pune 2008 (225) ELT 513 (Tri.-Bom), and Das and Company vs. Collector of Central Excise, Bombay 2000 (121) ELT 275 (LB - Tri.). 9. It is also submitted that for the subsequent period April 2016 to June 2017, the Adjudicating Authority vide Order No.14 / 2022 dated 04.03.2022 had decided the issue in the appellant's favour and since Revenue has not filed any appeal, the Rule of consistency ensures that this fact that the legal ....
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....1-07-2012, in so far as the manpower services used for providing insurance auxiliary services to the insurance companies were concerned, the SCN has alleged that the definition of output service as provided under Rule 2(p) of the CCR excludes from its purview the services for which service tax is paid by the recipient of service under reverse charge mechanism and since the insurance companies were discharging the service tax as recipient of services in terms of Section 68 (2) read with Sl.No.1 of notification No.30/2012-ST the manpower services used to render such insurance auxiliary services do not fall under the ambit of the definition of 'input services'. As regards the mutual fund distribution services provided post 01-07-2012, the allegation is that the appellant is disentitled to claim cenvat credit on the manpower services used for rendering the mutual fund distribution services since the impugned manpower services are not used in the regular taxable service and further such mutual fund distribution services are exempt from payment of service tax under Sl.No.29 of Notfn. No. 25/2012-ST dated 20.06.2012. The SCN invokes Explanation II to Rule 6(1) alleging that as per the sai....
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....ess verticals, namely General Insurance, Home Loans, Mutal Funds/investments/wealth advisory services, Life Insurance and customer care services is clearly vindicated. Therefore, given that the allegation in the SCN was only seeking to deny the cenvat credit alleging that the said manpower services were used exclusively for providing insurance auxiliary services to the insurance companies and for providing mutual fund distribution services, which admittedly has been found to be otherwise, it was incumbent upon the Ld. Adjudicating Authority to examine whether the very basis of the allegation in the SCN has stood up to scrutiny. In such circumstances, the adjudicator ought to have held that the very basis of the allegation having been thus disproved, given that the impugned manpower services are being commonly used by the appellant across all its business verticals, the demand of alleged ineligible cenvat credit on this count would not sustain. 16. Pertinently, we find that while the SCN concededly states that the appellant is rendering apart from its regular business, Insurance Auxiliary Services to insurance companies and mutual fund services to Sundaram Asset Management Compan....
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....he settled principle that there cannot be taxation by inference or implication. Therefore, we are of the considered view that there cannot be a blanket denial of the benefit of the cenvat credit on such manpower services availed, except to the extent it can be licitly curbed under provisions of Rule 6 of the CCR that details the obligation of a provider of output service and stipulates the manner in which CENVAT credit entitlement is to be determined. 18. When we examine Rule 6 of the CCR, it can be seen that Rule 6(1), inter-alia, stipulates that CENVAT credit shall not be allowed on input service used for provision of exempted services, except in the circumstances mentioned in sub-rule (2). Rule 6(2), inter-alia, mandates that where a provider of output service avails of CENVAT credit in respect of any input services and provides such output service which are chargeable to tax as well as exempted services, then the provider of output service shall maintain separate accounts for receipt and consumption of inputs and receipt and use of input services separately for the provision of exempted services and for provision of output services excluding exempted services and shall take ....
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....ombay 2000 (121) ELT 275 (LB - Tri.) in support of the said contention. 21. It is seen that the Central Board of Excise and Customs in the letter F.No.334/3/2011-TRU dated 28th February 2011, in Annexure C thereto, while detailing the important changes in Cenvat Rules, 2004 has in para 3 under heading "obligation of manufacturer and provider of services", stated as under: "1.16 A substantial part of the income of a bank or a life insurance company is from investments or by way of interest in which a number of inputs and input services are used. There have been difficulties in ascertaining the amount of credit flowing into earning these amounts. Thus a banking company or a financial institution, including NBFC, providing banking and financial services are being obligated to pay an amount equal to 50% of the credit availed. In case of services relating to life insurance or management of ULIPs such amount will be equal to 20% of credit availed. Other options of payment of amount under Rule 6 shall not be available for these taxpayers." (emphasis supplied) 22. The adjudicating authority has held that the said contention is unacceptable as it has been held that part of....
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....nt, that is to say, to avoid the operation and effect of all contrary provisions." 25. Rule 6(3B) begins with "Notwithstanding anything contained in subrules (1), (2) and (3), a banking company and a financial institution including a non-banking financial company, engaged in providing services. ....." Thus, the intention of the legislature is clear, the said rule is specific to particular businesses, namely, a banking company and a financial institution including a non-banking financial company engaged in providing services as stipulated therein. Pertinently, it does not state that such companies are required to engage only in the specified services or that if they were to engage in any other services the rule is inapplicable. That is there is no intent to impose any such limitation that is manifest in the text of the Rule. Thus, the Rule would continue to be applicable to these institutions, even if they were to engage in other services so long as they continue to be a banking company and a financial institution, including a non-banking financial company. It is settled that a prohibition explicitly not stated, cannot be read in by applying the theory of implied limitations part....
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....ral Board of Excise and Customs in the letter F.No.334/3/2011-TRU dated 28th February 2011, as has been noticed by us supra, is also to this effect. It is pertinent that the Adjudicating Authority, despite noticing the appellant's reliance on the said letter, has chosen not to controvert the same. It is settled that the Department cannot argue against its own circular. The decision in Union of India v. Arviva Industries (I) Ltd, 2007 (209) ELT 5 (SC) refers in this regard. This to our mind, is the harmonious construction to which the CCR lend themselves in the scenario such as that of the appellant in the instant case. It is fundamental that, an interpretation by which the beneficial right to avail cenvat credit that is available is upheld to its fullest, is an interpretation that is preferable to an interpretation that attenuates, diminishes, or worse, abrogates the said right. 27. Our aforesaid view, is also fortified by the decision of the Larger Bench of this Tribunal in South Indian Bank v. Commissioner of Customs, C.Ex & ST, Calicut, 2020 (41) G.S.T.L 609 (Tri-LB), wherein it has been held as under: "56. It has also been submitted by Learned Counsel appearing for ....
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....entral Excise, (2025) 26 Centax 50 (Tri-LB), while deciding a reference, the Larger Bench of this Tribunal has concluded as under: "59. In view of the aforesaid discussion, it has to be held that the Division Bench of the Tribunal was not justified in itself framing three questions to be referred to a Larger Bench of five Members of the Tribunal after disagreeing with the views expressed by the Larger Bench of the Tribunal of three Members in South Indian Bank. The Larger Bench decision of the Tribunal of three Members in South Indian Bank does not require re- consideration by a Bench of five Members of the Tribunal. In any view of the matter, there is no requirement of referring the matter to a Larger Bench of five Members of the Tribunal as the decision of the Larger Bench of the Tribunal in South Indian Bank has been upheld by the Kerala High Court and the Bombay High Court." (emphasis supplied) 29. Thus indisputably, the opinion expressed by the Larger Bench in the decision in South Indian Bank as observed supra, holds the field and bolsters our findings as elaborated above. Therefore, we are of the considered view that the impugned order holding to the contrary,....