Whether Cenvat credit admissible on various professional services availed for expansion of manufacturing plant?

PJ/ Case Laws/2012-13/1273

Case: - KERNEX MICROSYSTEMS (I) LTD. versus COMMISSIONER OF C. EX., HYDERABAD

Citation: - 2012 (27) S.T.R. 42 (Tri. – Bang.)

Brief Facts:-The application filed by the assessee seeks waiver of pre-deposit and stay of recovery in respect of duty, equal amount of penalty and interest on duty. The demand arises of denial of CENVAT credit on certain amounts paid by the appellant as consideration for professional services received from certain agencies in connection with implementation of expansion project, for which an initial public offer was issued. The services received by the assessee were in the nature of appraisal of business plan, assistance to public issue of equity shares, underwriting commission, advertisement etc. The department did not recognize these services to be 'input services' within the definition given under Rule 2(1) of the CENVAT Credit Rules, 2004, manufacture of machinery in the appellant's factory. According to the Revenue, there was no relation between the aforesaid services and the manufacturing of the machinery.

Appellant Contention’s:-The appellant submits that the services in question were availed for the purpose of expanding their manufacturing plant and were squarely covered by definition of 'input service' under Rule 2(1). The appellant has particularly referred to the inclusive part of the definition and has submitted that business activities relating to financing are expressly covered by the inclusive part of the definition. It is submitted that the activities mentioned in the inclusive part of the definition were also having a relation with the manufacture of the final products inasmuch as a direct or indirect relation is what is envisaged in the definition. The Appellant relied upon following cases:

Ø Commissioner of C. Ex., Nagpur v. Ultratech Cement Ltd.
Ø Commissioner of C. Ex., Bangalore-III v. Stanzen Toyotetsu India (P) Ltd.
The appellant has quoted both the judgments in support of the plea that the services availed by the appellants for expanding their manufacturing activity clearly passed the test laid down by the Hon'ble High Courts.

Respondent Contention’s:-The respondent submits that he has opposed the present application on the strength of the findings in the order-in-original and the order-in-appeal.

Reasoning of Judgement: -We have considered the submissions made by both the sides. It appears from the records that the taxable value determined by the department comprises amounts paid by the appellant to various agencies as consideration for services received in connection with expansion of their manufacturing plant. Prima facie, the services availed in connection with floating initial public offer and the allied business activities would fall within inclusive part of the definition of input service under Rule 2(1) ibid in terms of the test laid down by the Hon'ble High Courts. We have also taken note of the partial pre-deposit made by the appellant. There will be waiver of pre-deposit and stay of recovery in respect of the balance amount of service tax and also the penalty imposed on the appellant.

Decision: -Appeal Allowed.

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PJ/ Case Laws/2012-13/1273

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