Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  The GSTN has issued an Advisory dated 21.04.2026 about the introduction of an Offline Tool for the Invoice Management System (IMS)  *  CBIC extends due dates for filing of FORM GSTR 3B  for the month of April 2026 *  Interest cannot be imposed in adjudication order, if not demanded/quantified in show cause notice : Allahabad HC *  Wheelchairs with toileting facility eligible for exemption: CESTAT affirms customs duty exemption to importer *  Industries urge GST council to allow inverted duty refunds on input services *  Tamil Nadu GST dept introduced virtual hearing facility for GST appeals under under section 107 of the TNGST act: detailed guidelines  *  CIC urges authorities to implement GST evasion complaint tracking system *  Even if the assessee opts "NO" for personal hearing in form DRC-06 ,The mandatory requirement under section 75(4) to grant opportunity of hearing cannot be waived:Gujarat High Court  *  Glufosinate imports curbs imposed by govt *  Government extends Re-import period for exported cut & polished diamonds *  CIC flags lack of tracking system for tax evasion complaints,urges GST authorities to improve transparency *  No Custodial Interrogation needed in GST fraud case based on documentary evidence already in Department's Possession : Chattisgarh HC *  Orders under section cannot be sustained if passed without considering the taxpayer's objections and without granting a personal hearing:Gujarat High Court *  Mere cancellation of supplier's registration cannot,by itself,justify denial of ITC or cancellation of the recipient's registration:Bombay High Court *  High Court sets aside GST notice citing factual errors and natural justice violations *  Provisional Bank Attachment under Section. 110 of Customs Act Unsustainable Beyond Statutory period without Extension order: Bombay HC orders to defreeze accounts *  Post Clearance MRP Alteration by Distributor Does not attract Differential Customs Duty: CESTAT *  DGFT Expands scope of 'Screws' classification under RoDTEP Scheme  *  E-way bills surze to all time high of 140.6 million in March *  GST Exemption Allowed on Pure Labour Services for Standalone Houses: AAR  *  GST Payable Only on Margin in Second-Hand Car Sales, Subject to Strict Conditions and No ITC Claim: AAR *  DGFT rolls out procedure for allocation of calcined coke *  GST portal update : Pre-deposit amount now editable in Appeals *  J&K HC declared TMT scrap a 'Specified Good' eligibile for GST refunds under Support Scheme  *  Pigmy agents are employees of banks; no GST can be levied on commission  paid to them : Karnataka HC *  DGFT Revises HS Code Description for Screws Under RoDTEP *  GST Registration Cancellation Invalid Without Proper Service of Notice: Allahabad High Court. *  Bengaluru CGST | GST Backlog Appeals Deadline Fixed at June 30, 2026 *  No Time Bar on Refund of Service Tax for Services Not Rendered: CESTAT  Remands Indiabulls Case for Unjust Enrichment Check. *  Supreme Court Holds Renewable Energy Incentive Must Benefit Generators, Not Be Adjusted in Tariff
Subject News *   Delhi HC Quashes Order, Says Reminder Cannot Validate Improperly Served GST SCN *  KARNATAKA HIGH COURT REMANDS GST SHORTFALL MATTER DUE TO ABSENCE OF PERSONAL HEARING   *  CESTAT cancels confiscation and penalties on imported computer cabinet cases: Custom duty restricted to 111 surplus units *  Deposit of tax during search or investigation cannot be treated as 'Voluntary Payment' : Bombay High Court *  Section 76 of the CGST cannot be invoked where the tax has already been duly deposited, even if through another registration of the same entity: Madras High Court *  Sec 74 allows use of material regardless of source; illegality or flaws in section 67 search do not vitiate valid adjudication: HC *  Inter-State transfer of ITC on Amalgamation permissible as given under section 18(3) read with rule 41 of the CGST rules, 2017: Gujarat High Court *  HC: No GST on commisson paid to Pigmy Agents *  IGST refund denial on illegible bill of lading invalid absent chance to furnish docs; merit reconsideration in appeals directed: HC *  ITC is not admissible on GST paid on leasehold rights of land used fpr setting up an air seperation plant: AAAR,Tamil Nadu *  GST: No penalty under Section 74 after voluntary ITC reversal due to non-existent supplier : High Court *  TN AAAR denies GST ITC on Land Lease under Sec. 17(5)(d) for setting up plant and machinery *  GST proceedings quashed as notices sent to old address, despite updated address in registration *  Importer Can’t Be Penalised for Alleged IGCR Procedural Lapses Without Evidence of Departmental Error: CESTAT *  Structured Healthcare Training Not ‘Charitable Activity’, 18% GST Payable: AAR  *  CESTAT As The Appellate Authority For Central Sales Tax Disputes: A Paradigm Shift Under Finance Act, 2023 *   Rs. 25K Cost Imposed On SGST Joint Commissioner for Attaching Bank  Accounts Without Forming Mandatory “Opinion”: Bombay HC *   Ex-Parte GST Order Without Hearing Violates Natural Justice: Karnataka  High Court Quashes Adjudication and Bank Attachment.  *   Retrospective GST Cancellation Can’t Invalidate Genuine Transactions:  Jaipur Commissioner (Appeals) Quashes Rs. 95,670 ITC Demand. *   GST Pre-Deposit Non-Compliance: Allahabad High Court Allows Appeal  Subject to Rs. 30 Lakh Balance Deposit, Recognises Offline Filing. *  Documentary Nature of Evidence: Allahabad High Court Grants Bail in Rs. 32.66 Crore Fake ITC Fraud Case *  Supreme Court Flags Systemic Bias in Army’s Permanent Commission Process for Women Officers *  Re-Determination of Land Compensation Can Be Based on Appellate Court Awards, Clarifies Scope of S. 28-A: Supreme Court. *  Supreme Court Imposes Rs. 5 Lakh Costs On Rent Authority Officer For Acting Beyond Jurisdiction. *  DGGI Meerut | Court Denies Bail to Accused in Claiming Fake ITC And Export Refunds *  Denial of GST Rate Revision Benefit to Contractor Violates Article 14: Rajasthan HC *  GST Registration Cancellation for Non-Filing of Returns: Gauhati High Court Directs Restoration on Compliance. *   Supreme Court Quashes FEMA Adjudication Orders, Revives Proceedings at  Show Cause Stage. *   Higher Rank, Harsher Punishment Justified: Supreme Court Restores Dismissal  of Bank Manager in Misappropriation Case. *   Limitation for Export Refund to Be Counted from Foreign Exchange Realisation,  Not From Export Invoices Issuance: CESTAT  

Comments

Print   |    |  Comment

PJ/Case Laws/2011-12/1236

Credit on advisory service provided for acquisition of company
Case: M/s Life Long India Ltd versus CCE, Delhi-III

Citation: 2011-TIOL-832-CESTAT-DEL

Issue:-  Whether credit on advisory services provided for acquisition of company can be denied? 
Whether credit is allowed on the basis of invoices issued in the name of registered office?

Brief Facts: The Appellant filed before the Tribunal because of denial of Cenvat credit on services availed by the appellant company on account of "professional fees towards providing advisory services for acquisition of company".

Appellant’s Contention: The Appellant submits that the definition of input service as it stood at the relevant time, was wide enough to cover the impugned services because it covered activities relating to business such as advertising, accounting, auditing, financing, credit relating, share registry and security.
Appellant relied upon the following cases:
-      Coca Cola India Ltd Vs CCE reported in 2009 (242) ELT 116 Bombay.
-      CCE Nagpur Vs Ultratech Cement Ltd reported in 2010 (20) STR 577 (Bom).
The appellant relies on the said judgment to emphasis the point that the list of services mentioned after the words 'such as' does not have an effect of restricting the definition of services eligible for credit. The list is only illustrative and not exhaustive.
Therefore, appellant says the activity of 'management consultancy' to acquire a new factory, which could be put to use by the appellants, is connected with the business activity of the appellant.
Appellantalso argues that raising of capital for the company is covered because 'financing' is covered specifically in the definition.

Respondent’s Contention: The adjudicating authority reproduced the definition of "input service" in Cenvat Credit Rules and gave a finding that this service is not covered by the said definition without giving any detailed reasons why he considers so.
Respondent argues that acquisition of a factory for use in future has no nexus with the goods being manufactured and cleared.
It is further argued that raising of capital for a new company has no nexus with the existing company and for that reason, the services cannot be considered as input service.
Respondent relies upon the following cases:
-      Maruti Suzuki Ltd 2009 (242) ELT 641
-      Manik Chand Vs CCE Nagpur 2010 (20) STR 456
Respondent also submits that credit was taken based on an invoice addressed to their registered office and therefore, the Appellant should have taken registration as 'input service distributor' as defined at Rule 2(m) of the Cenvat Credit Rules, 2004.
Respondent argues that the decision in Ultratech Cement relates to 'catering services' and it is not relevant to the services in dispute in the present case.
Respondent submits that the impugned service in the case of Coca-cola (supra) was that of advertising agency which is specifically mentioned in the definition of input service.
Respondent states that catering provided in the factory and advertising may have indirect nexus with the goods manufactured, but 'management consultancy' and service in relation to 'raising of capital' have no direct or indirect nexus.

Reasoning of the Judgment: The Tribunal notices a factual error in the finding of the Commissioner (Appeals) where it is mentioned that the proposed activity was raising of capital for a new company. The matter under consideration was acquisition of a new company. The capital of the existing company had to be raised to pay the share holders of the target company. Therefore, the bill raised by the consultant is in relation to providing advisory service for raising the equity capital of the appellant company. To that extent, the facts are recorded inaccurately.
In the case of Ultratech Cement, the Hon'ble High Court has clearly ruled that the service mentioned in definition of “input services” is illustrative and not exhaustive. The definition given under Rule 2(1) for input services includes activities like setting up of a factory which precedes manufacturing activity. It is also to be noted that once the assessee is eligible to take credit, there is no restriction in the Rules that the credit should be used on the product manufactured using the input service. Once credit is taken, it can be utilized on any of the output services or final products of the company. It is not necessary that credit is to be used for paying the duty on the final product that is coming out of new plant proposed to be set up. Therefore, the Tribunal does not see any merit in the argument that the cenvat credit taken relates to services of future business of the company.
Regarding the issue that credit was taken in the factory based on an invoice issued in the name of the registered office, the Tribunal observes that this is a matter which has been decided in many cases by the Tribunal and credit cannot be denied for that reason. The provision relating to input service distributor is not applicable here because credit is not getting distributed to many locations. If at all applicable, it is only a procedural requirement and credit cannot be denied so long as there is no case of misuse of credit.
The Tribunal also does not see any merit in the argument that the impugned services are different from the services considered in the decision given in the case of Coca Cola India Pvt Ltd and Ultratech Cement Ltd (supra). The services are different but the issues are the same.

Decision: Appeal is allowed.

Comments:- In this decision also, it is ruled that credit on all the services relating to business will be allowed. But the definition of “input service” has been changed from this budget. This will have impact on future decisions.
The second main issue is that when the invoice is issued in the name of head office then the department insists on taking of registration of “input service distributor” even though there is only one factory of the manufacturer. It is clearly held that there is no need of “input service distributor”. This is landmark judgement for assessee having one factory and audit raising this point again and again.

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