Whether credit of ST paid on Brokerage for sale/purchase of shares & securities for Trading, Event management services available?

PJ/CASE LAW/2015-16/2599

Case:-BANK OF BARODA LTD. Vs COMMISSIONER OF CENTRAL EXCISE, THANE-II .

Citation:-2015 (37) S.T.R. 488 (Tri. - Mumbai)

Brief Facts:-The applicants are seeking waiver of pre-deposit of Service Tax of Rs. 4,88,93,874/- along with interest and various penalties under the Finance Act, 1994, on account of denial of Cenvat credit on certain input services.
The brief facts of the case are that applicant is a banking company engaged in providing banking and financial services to their clients. To provide their services the applicants are required to maintain CCR and SLR as per guide-lines prescribed by RBI. For this, the applicant is paying brokerage and sale of investment and also paying custodian charges to M/s. Stock Holding Corporation of India Ltd. No doubt on these charges the service provider is paying Service Tax and charging from the applicant. The applicant has taken Cenvat credit on the Service Tax paid on these services. Further, the applicant has availed Cenvat credit on event management charges paid by them to custodian for celebration of annual day function etc., they have also taken the Cenvat credit on the consortium charges paid to the lead bank i.e. SBI and also taken the Cenvat credit on maintenance charges for residential flat of Managing Director. The Revenue is of the view that all these services are not input service for providing output service by the applicant. Therefore, they are not entitled to take Cenvat credit on these input services. Accordingly, the show cause notices were issued and same was converted into impugned orders. Aggrieved from the said orders, the applicant is in appeals before Tribunal and seeking waiver of pre-deposit of the impugned demands.

Appellant contentions:- Shri S.S. Gupta ld. CA for the applicant submits that the brokerage paid on purchase, sale and investment and custodial charges of Stock Holding Corporate Ltd. are statutory expenses to be incurred by the applicant to do their banking business. Therefore, whatever charges they have paid, the Service Tax is also paid thereon. Therefore, they are entitled for Cenvat credit of Service Tax paid on these charges, as these charges are related to their business activity. It is further submitted that for event management charges also they are entitled to take Cenvat credit as these events are carried out by them to celebrate their anniversary wherein their clients, employees and other persons have participated. He further submits that Cenvat credit has been denied on service charges paid to the lead bank, on account of documents against which they have availed Cenvat credit against prescribed document under Rule 9(f) of the Cenvat Credit Rules, 2004. In this context, it is submitted that as per Rule 4A of the Service Tax Rules, 1994, the concession has been given to the banking and financial institution and as all the details required as per Rule 4A ibid are present, the applicant is entitled to take Cenvat credit. For maintenance charges for residential flat of Managing Director, the ld. Consultant submits that they have reversed the credit.

Respondent Contentions:- On the other hand, the ld. AR opposed the contention of the ld. CA and submits that the Cenvat credit taken by the applicants for three services mentioned hereinabove is not entitled to take Cenvat credit as these services are not directly related to their business activity. Therefore, the applicant be put to terms, at this stage.

Reasoning of Judgment:-The learned heard the parties and considered their submissions.
After hearing arguments advanced by the ld. Consultant, we are of the view that the services namely Brokerage for sale/purchase of shares & securities for Trading, Custodian charges, Event management services paid by them are in nature of input services having nexus to their business activity. Therefore, they are entitled to avail input service credit. We further find that as per Rule 4A of the Service Tax Rules, the required document that has been mentioned is the debit note issued by lead bank i.e. State Bank of India for Custodian charges and it contains all details. Therefore, applicants are entitled to take Cenvat credit on the said document. As the applicant had already reversed a sum of Rs. 44,620/-against the maintenance charges for residential flat of the Managing Director, therefore, the applicant has made out a case for complete waiver of pre-deposit. Accordingly, we waive the requirement of pre-deposit of Service Tax, interest and penalties and stay recovery thereof during the pendency of the appeal.

Decision:- Stay granted.

Comment:-The crux of the case is that service tax paid for Brokerage for sale/purchase of shares & securities for Trading, Custodian charges, Event management services are in nature of input services having nexus to their business activity. Therefore, the assessee will be entitled to avail input service credit of the same.

Prepared By:Meet Jain

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PJ/CASE LAW/2015-16/2599

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