Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *   CBIC issues draft rules for Customs valuation *  Top Headlines: Threshold for Benami deals, green bond investors, and more *  Govt aims 1-hour clearance for goods at all ports *  Exporters Allowed To Use RoDTEP, RoSCTL Scrips To Pay Customs Duty, Transfer Them; Rules Amended *  Millions of labourers to be affected by brick producers’ strike over hike in GST, coal rates *  Inauguration of ‘kendriya GST parisar’ *  Transporter can seek Release of Conveyance alone, not Goods under GST Act: Madras HC *  GST: Quoting of DIN Mandatory for Responding to Notice, Govt Modifies Portal *  Firms can soon file claims for GST credits of ?400 cr *  CBIC issues modalities for filing transitional credit under GST. *  Mumbai: Man creates 36 fake GST firms, arrested for input tax credit fraud of Rs 23 cr *  Report to restructure Commerce Ministry under study; idea is to set up trade promotion body: Goyal *  Firms can soon file claims for GST credits of ?400 cr *  Gambling Alert! Govt May Levy Up To 28% GST; UP, Bengal Back Move *  EPFO backs raising retirement age to ease pressure on pension funds *  India Moving Up Power Scale, Set to Become Third Largest Economy By 2030 *  Airfares Get Expensive: What Changes for Flyers From Today? *  IRCTC Latest News: Passengers to Pay More For Cancelling Confirmed Rail Tickets Soon. *  IBC prevails over Customs Act, says Supreme Court. *  As GST enters sixth year, a time for evaluation and reassessment *  There’s GST on daily essentials as Centre needs money to buy MLAs: Arvind Kejriwal *  Now, GST on cancellation of confirmed train tickets, hotel bookings *  GST kitty for top States could rise 20% in FY23, says Crisil *  French customs officials seize another cargo vessel over Russia sanctions *  TradeLens builds on Asia momentum with Pakistan Customs deal *  Hike tax on tobacco, reduce affordability & increase revenue: Civil society organizations to GST council *  Bihar: ?10 crore tax evasion on tobacco products detected in raids *  Centre failed on GST, COVID; would it be anti-national? Rajan on Infosys row *  Service Tax not Chargeable on Income Tax TDS portion paid by recipient: CESTAT grants relief to TVS *  Foreign portfolio investors make net investment of Rs 7575cr in Sep so far
Subject News *  Run-up to Budget: Monetary threshold for GST offences may rise to Rs 25 cr *   GST (Tax) E-invoice Must For Businesses With Over Rs 5 Crore Annual Turnover *   Both Central GST and excise duty can be imposed on tobacco, rules Karnataka high court *   CBIC Issues Clarification On Extended Timelines For GST Compliance *   CBIC Issues Clarification On Extended Timelines For GST Compliance *  Budget 2023- 9.6 crore gas connections *  GST: Tamil Nadu Issues Instructions for Assessment and Adjudication Proceedings *  GST: CBIC Extends Last Date for filing of ITC *  GST collection in September surpasses Rs 1.4 lakh crore for straight seventh time *  Dollar smuggling case: Customs chargesheet names M Sivasankar as key conspirator. *  Hike in GST rates fuels inflation *  Assam: CBI arrests GST commissioner in Guwahati *  GST fraud worth ?824cr by 15 insurance Cos detected *  India proposes 15% customs duties on 22 items imported from UK *  Decriminalising certain offences under GST on cards *  Surge in GST collections more due to higher inflation: India Ratings *  MNRE Notifies BCD and Hike in GST Rates as ‘Change in Law’ Events But With a Condition | Mercom India *   Solar projects awarded before customs duty change allowed cost pass-through *  Rajasthan High Court Dismisses Writ Petitions Challenging Levy Of GST On Royalty *   GST revenue in September likely at Rs 1.45 lakh crore *  Govt working on decriminalising certain offences under GST, lower compounding charge *  Building an institution like GST Council takes time, trashing is easy: Sitharaman *  GST collections in Sept may touch ?1.5 lakh crore *  KTR asks Centre to withdraw GST on handlooms *  After Gameskraft, More Online Gaming Startups To Receive GST Tax Claims *  Madras HC: AAR Application Filed Under VAT Does Not Survive After GST Enactment *  Threshold for criminal offences under GST law may be raised *  Bengaluru: Gaming company faces biggest GST notice of Rs 21,000 crore *  CBIC clarifies Classification of Cranes for GST, Customs Duty *  Customs seize gold hidden in bicycle in Kerala airport  

Comments

Print   |    |  Comment

PJ/CASE LAW/2016-17/3190

Credit admissibility of service tax paid on External Commercial Borrowings under RCM.

Case:-MICRO INKS PRIVATE LTD. VERSUS COMMISSIONER OF C. EX., CUS & S.T., DAMAN
 
Citation:- 2016 (41) S.T.R. 501 (Tri. - Ahmd.)

Brief Facts:-This appeal has been filed by the appellant with respect to OIA No. CS/182/DMN/VAPI-I/2011-12, dated 2-2-2012.
 
Appellant’s Contention:-Shri S. Suriyanarayanan, Advocate appearing on behalf of the appellant argued that the issue involved in this appeal is whether appellant can distribute service tax credit of service tax paid on external commercial borrowings (ECB) paid under reverse charge mechanism. It was his case that service tax under reverse charge was paid by the appellant under “Banking and other financial services” as per Section 65(12)(a)(ix) of the Finance Act, 1994. It was his case that these Services are availed by the appellant in relation to their business activities which is squarely covered by the judgment of this Bench in the case of Commissioner of Central Excise, Customs & Service Tax, Visakhapatnam-Iv. GMR Industries Ltd. [2015 (38) S.T.R. 509 (Tri.-Bang.)]. Learned Advocate also relied upon the judgment of ABB Ltd. v.Commissioner of Central Excise, & Service Tax, Bangalore [2009 (15) S.T.R. 23 (Tri.-LB)] to argue that at the relevant time the words ‘activities in relation to business’ was mentioned in the definition of Rule 2(l) of the Cenvat Credit Rules, 2004 and, therefore, Cenvat Credit on such services was correctly taken by the appellant and distributed to its manufacturing units in India.
 
Respondent’s Contention:-Shri L. Patra (AR) appearing on behalf of the Revenue made the Bench go through para 17.7 of OIO No. 04/OA/Adj/SNP-AddI/2011-12 and para 5.3.2 of OIA dated 2-2-2012 to argue that the activities of external commercial borrowings have no relation with the manufacturing activities of the appellant in India, therefore, Cenvat credit has been correctly denied by the first appellate authority.
 
Reasoning Of Judgement:-Heard both sides and perused the case records. The issue involved in this appeal is whether service tax paid by the appellant on external commercial borrowings (ECB), on which service tax was paid under “Banking and other financial services” by the appellant under reverse charge, is admissible under the Cenvat Credit Rules or not. It is observed from para 5 of the show cause notice, dated 15-10-2010 that Shri Prakash Mehta, Senior Manager (Accountants) and authorized person of the appellant has, inter alia, mentioned that ECBs are obtained by the appellant for the purpose of capital expenditure to increase their existing facility and to create new production capacity of the company in India and abroad. The ‘ECB’ services availed by the appellant are therefore, clearly in relation to the business activities and for promoting the inks manufactured by the appellant. It is the case of appellant that during the relevant period the activities relating to business was covered with the definition of inputs services under Rule 2(l) of Cenvat Credit Rules, 2004. No contrary arguments are available in the orders passed by the lower authorities that such activities relating to business were not existing in the definition of Rule 2(l) of the Cenvat Credit Rules, 2004. Hence, it is held that the services availed by the appellant were “Banking and other financial services” on which service tax was paid under reverse charge. The factual matrix of this case is thus stand covered by the case law of this Bench in the case ofCommissioner of Central Excise, Customs & Service Tax, Visakhapatnam-I v. GMR Industries Ltd. (supra). The Cenvat credit taken by the appellant with respect to the ECB for which tax was paid under “Banking and other financial services”, is therefore covered within the definition of Rule 2(l) of the Cenvat Credit Rules, 2004 prevalent during the relevant period. In view of the above observations, appeal filed by the appellant is allowed on merits with consequential relief.
 
Decision:-Appeal allowed.
 
Comment:- The crux of the case is that since the ECBs are obtained by the appellant for the purpose of capital expenditure, to increase their existing facility and to create new production capacity of the company in India and abroad. Thus the ‘ECB’ services availed by the appellant have clear nexus with the business activities. And, therefore according to Rule 2(l) of Cenvat Credit Rules, 2004, the Cenvat credit is admissible to the assessee on ECB for which tax was paid by them under “Banking and other financial services”.

Prepared By:- Neelam Jain
 
 

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com