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M/s. Hinduja Global Solutions Ltd Versus Commissioner of Central Excise, Service Tax And Customs Bangalore-II

2016 (3) TMI 401 - CESTAT BANGALORE

CENVAT credit - Scope of input services - Input services received at their Head Office and subsequently distributed to the appellant herein - Input Service Distributor (ISD) - procedure not followed - Held that:- The plain reading of the definition of input services (as hereinabove reproduced) indicate that the activities relating to business which is in the second portion of the definition includes the activity of financing which would mean that if an assessee pays service tax for the various s .....

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credit to the output service provided by them. - As regards the dispute raised in the impugned order as to eligibility to avail the CENVAT credit on the invoices raised by the ISD for the services received prior to the registration of the Head Office as an Input Service Distributor, it is held that such credit can be availed. - Demand set aside - Decided in favor of assessee. - ST/2338/2010-DB - Final Order No. 20059 / 2016 - Dated:- 19-1-2016 - SHRI M.V.RAVINDRAN, JUDICIAL MEMBER AND SH .....

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Appellant herein is provider of output services under the category of Manpower Recruitment and Supply Agency services, Business Auxiliary Services, Commercial Training or Coaching Services and Business Support Services and also are engaged in export of such services. In order expand the business, the appellants Head Office had generated funds, for financing the expansion by way of various sale of properties, shares, advisory services in respect of investment and divestment and syndication fee .....

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its as well as on limitation. The adjudicating authority after following due process of law did not agree with the contentions raised and confirmed demands with interest and imposed penalties. 3. Learned CA after taking us through the show-cause notice, the adjudication order and various other documents would submit that the appellant had embarked upon expansion of their business for which working capital is required and the financing is arranged by bank borrowings, issue of shares and disposal .....

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relation to the business activity of the appellant more specifically for an activity related to business of financing the expansion. He would then take us through the provisions of Rule 2(l) of the CENVAT Credit Rules. It is his submission that the definition clearly includes the activity for which the appellant has paid the service tax. It is his further submission that the adjudicating authority in the impugned order has also recorded a finding that the Head Office of the appellant who is reg .....

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aw our attention to the expansion that took place of the appellant s business in the form of revenue operations for the financial year 2006-07 to 2014-15. He would also submit that they have expanded their branches to various other cities and have increased from 8 branches to 26 branches. He relies upon the judgment of the Tribunal in the case GMR Industries: 2015 (38) S.T.R. 509 (Tri.-Bang.); Aditya Birla Nuvo Ltd.: 2009 (14) S.T.R. 304 (Tri.-Ahmd.) for the proposition that input services used .....

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very clearly mentioned that these credits are availed on the basis of the invoices raised by their Head Office as an ISD. It is his further submission that the Department has not issued any show-cause notice to their Head Office seeking them to explain as to why such credit availed by them and distributed is not to be demanded. It is his submission that when the original CENVAT credit availed of the service tax paid by the Head Office is not contested, subsequent credit availed by them is corre .....

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ur attention to the findings recorded by the adjudicating authority and submit that the appellant is unable to justify the availment of the CENVAT credit of the services that they were used for providing of an output services. It is his submission that the invoices against which the appellant availed the CENVAT credit was found to be in respect of invoices which were not connected to taxable output services; and not in relation to the output services provided. He would then submit that the input .....

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y the appellant. 5. We have considered the submissions made at length by both sides and perused the records. 5.1 The issue involved in this case is whether the appellant has correctly availed CENVAT credit or otherwise in respect of the service tax paid on the services received by their Head Office in respect of the disinvestments undertaken by them. 5.2 Undisputedly facts are that appellants are output service providers and discharging service tax liability; they had their Head Office at Mumbai .....

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t or not. In order to appreciate the correct position of law, we have to reproduce the definition of the input services as per Rule 2(l) of the CENVAT Credit Rules, 2004 which reads as under: 2(l) "input service" means any service,- (i) used by a provider of taxable service for providing an output service; or (ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, in .....

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transportation of inputs or capital goods and outward transportation upto the place of removal; It is seen from the records that the CENVAT Credit paid by the appellant is in respect of the service tax paid by various service providers who had rendered the services of raising the finance by pledging of the shares on behalf of the appellant for borrowing from IDFC Ltd.; advisory service provider in relation to divestment of stakes in Indus Ind Telecom Network Ltd.; advisory services provided for .....

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controverted in the impugned order which would mean that the adjudicating authority has accepted that the appellant had embarked upon the expansion of the business. It is to be recorded that for expanding any business, there is always requirement of working capital which needs to be raised by the assessee and in this case, it is undisputed that the appellant had raised such finances by divestment and disinvestment of the business interest they had in various entities. 5.5 The plain reading of t .....

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e CENVAT credit which is availed by the appellant is in respect of the distribution of the service tax by their Head Office as input service distributor. We find nothing on record to indicate that Head Office of the appellant was issued a show-cause notice denying them such CENVAT credit. In the absence of any doubt raised as to the eligibility to avail the CENVAT credit at their Head Office, the recipient unit, cannot be asked to explain the nexus of such credit to the output service provided b .....

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llant. We find that our above view that the services which are rendered for the business activities as per the definition of the input service under Rule 2(l) of CCR, 2004 has been fortified by the judgment of the Hon ble High Court of Bombay in the case of Deepak Fertilizers and Petrochemicals Corpn. Ltd. vs. CCE: 2013 (32) S.T.R. 532 (Bom.) and Commissioner vs. Ultractech Cement Ltd.: 2010 (260) E.L.T. 369 (Bom.). Relevant facts are reproduced below: In the case of Deepak Fertilizers (supra): .....

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t the Service Tax should be paid on any input or capital goods received in the factory of manufacture of the final product. Such a restriction, however, is not imposed in regard to input services since the only stipulation in clause (ii) is that the input services should be received by the manufacturer of the final product. Hence, even as a matter of first principle on a plain and literal construction of Rule 3(1) the Tribunal was not justified in holding that the appellant would not be entitled .....

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ad and comprehensive expression while defining the expression input service. Rule 2(l) initially provides that input service means any services of the description falling in sub-clauses (i) and (ii). Rule 2(l) then provides an inclusive definition by enumerating certain specified services. Among those services are services pertaining to the procurement of inputs and inward transportation of inputs. The Tribunal, proceeded to interpret the inclusive part of the definition and held that the Legi .....

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part of the definition enumerates certain specified categories of services. However, it would be farfetched to interpret Rule 2(l) to mean that only two categories of services in relation to inputs viz. for the procurement of inputs and for the inward transportation of inputs were intended to be brought within the purview of Rule 2(l). Rule 2(l) must be read in its entirety. The Tribunal has placed an interpretation which runs contrary to the plain and literal meaning of the words used in Rule .....

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input services in the present case were used by the appellant whether directly or indirectly, in or in relation to the manufacture of final products. The appellant, it is undisputed, manufactures dutiable final products and the storage and use of ammonia is an intrinsic part of that process. In the case of Ultractech Cement: 27. The definition of input service as per Rule 2(l) of 2004 Rules (insofar as it relates to the manufacture of final product is concerned), consists of three categories of .....

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promotion, market research, storage upto the place of removal, procurement of inputs, (d) Activities relating to business such as, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit relating, share registry and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal. Thus, the definition of input service not only covers services, which fall in the substantial part, but also .....

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on of input service read as a whole makes it clear that the said definition not only covers services, which are used directly or indirectly in or in relation to the manufacture of final product, but also includes other services, which have direct nexus or which are integrally connected with the business of manufacturing the final product. In the facts of the present case, use of the outdoor catering services is integrally connected with the business of manufacturing cement and therefore, credit .....

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