Admissibility of service tax credit on Techno Feasibility study for rehabilitation.

PJ/Case Law/2013-14/2031

Case:- JENSON & NICHOLSON (INDIA) LTD. Versus COMMR. OF C. EX., NOIDA

Citation:- 2013 (31) S.T.R. 626 (Tri. - Del.)

Brief Facts:- The appellant are manufacturers of paints and varnishes. They have factories at Panvel (Maharashtra), Naihati (West Bengal) and Sikandrabad (U.P.). Two of the appellant's factories in Panvel and Naihati have closed down and the company has become sick and gone to BIFR for finalizing rehabilitation package. In terms of the order of the BIFR, SBI Capital Market Ltd. conducted a techno feasibility study regarding rehabilitation and prepared a report in this regard regarding rehabilitation for further fund raising for the appellant-company. M/s. SBI Capital Market Ltd. for the service of preparing techno feasibility report regarding rehabilitation have charged some amount on which Service Tax amounting to Rs. 2,56,361/- had been paid and the appellant have taken credit of this amount. The department is of the view that this service received by the appellant from M/s. SBI Capital Market Ltd. is not covered by the definition of 'input service'. On this basis, the Jurisdictional Assistant Commissioner vide order-in-original dated 30th August, 2010 confirmed the Cenvat credit demand of Rs. 2,56,361/- along with interest and imposed penalty of equal amount. On appeal to Commissioner (Appeals), this order of the Assistant Commissioner was upheld vide order-in-appeal dated 31-12-2010 against which this appeal along with stay application has been filed.

Appellant Contentions:- The Appellant pleaded that the service of preparing feasibility report regarding rehabilitation had been received by the appellant from M/s. SBI Capital in terms of the orders of the BIFR, that report is regarding modalities of arranging the finance for rehabilitation of the appellant-company, that the services received from M/s. SBI Capital have clear nexus with the manufacturing business of the appellant and hence the same are covered by the term "activities relating to business" in the definition of 'input services' as given in Rule 2(l) of Cenvat Credit Rules, 2004, that the impugned order denying Cenvat credit is, therefore, incorrect, that the appellant have a strong prima facie case and hence the requirement of pre-deposit may be waived for hearing of the appeal.

Respondent Contentions:- The Respondent opposed the appellant's plea for waiver by reiterating the findings of the Commissioner (Appeals) in the impugned order. He pleaded that the service received is a financial service which is not covered by the definition of "input service" in Rule 2(l).

Reasoning of Judgment:- We have carefully considered the submissions from both the sides and perused the records. The service of preparing feasibility report for rehabilitation of the company had been received by the appellant from M/s. SBI Capital in terms of the directions of the BIFR. Without such feasibility report from the M/s. SBI Capital rehabilitation package could not be finalized by the BIFR. Therefore, the service received by the appellant from SBI Capital has very much nexus with their manufacturing business and is covered by the term "activities relating to business" in the inclusive part of the definition of "input service", as given in Rule 2(l). In view of this, the requirement of pre-deposit of Cenvat credit demand, interest and penalty is waived for hearing of this appeal and recovery thereof is stayed till the disposal of the appeal. The stay application is allowed.

Decision:-Stay application allowed.

Comment:- The crux of this case is that the techno feasibility services received for rehabilitation of the company declared as sick are also eligible for credit in terms of the definition of input service given under Rule 2(l) of the Cenvat Credit Rules, 2004. It can be said such service has nexus with the manufacturing business and is covered by the term "activities relating to business" in the inclusive part of the definition of "input service".

Comments

PJ/Case Law/2013-14/2031

Post a Comment

Query