Custom, Excise & Service Tax Tribunal
M/S Life Long India Ltd vs Cce, Delhi-Iii on 30 March, 2011
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
Court No.IV
E/Appeal No.2137/09
(Arising out of order in appeal No.11/ANS/GGN/09 dated 27.4.2009 passed by the Commissioner of Central Excise (Appeals),Gurgaon)
Date of Hearing: 30.3.2011
For Approval and signature:
Honble Mr.Mathew John, Technical Member
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1. Whether Press Reporters may be allowed to see
The order for publication as per Rule 27 of the
CESTAT(Procedure) Rules, 1982?
2. Whether it would be released under Rule 27 of
the CESTAT (Procedure) rules, 1982 for
publication in any authoritative report or not?
3. Whether their lordships wish to see the fair
copy of the order?
4. Whether order is to be circulated to the
Department Authorities?
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M/s Life Long India Ltd Appellant
Vs
CCE, Delhi-III Respondent
Appeared for the Appellant: Shri Hemant Bajaj, Advocate
Appeared for the Respondent: Shri K.P. Singh, SDR
Coram: Honble Mr. Mathew John, Member (Technical)
ORDER
Per Mathew John:
The Appellant is before the Tribunal aggrieved by the denial of Cenvat credit taken on services availed by the appellant company on account of professional fees towards providing advisory services for acquisition of company during the year 2005-06. The credit was taken on 30.6.06 and the show cause notice was issued on 16.11.2010. 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. The Commissioner (Appeals) while examining the issue, gave a finding as under:
The appellant have contended that they have taken advisory services for seeking the advice from M/s Deloitte Touche Tohmatsu India for acquisition of another company for the purpose of sharing the overload of manufacturing activities of the existing sole manufacturing unit at Dharuhera. The appellant tried to interperate that the said input service is indirectly related to the manufacturing activity. This contention of the appellant cannot be accepted inasmuch as the said services have been utilized for another preemies. I find that the above service does not qualify as input service in the light of first part of the definition of input service i.e. in or in relation to the manufacture of final products, nor under inclusive part of the definition, i.e. the activities relating to business. In my view, input services should be strictly construed as per the definition. The above category of service attract service tax which has been utilized for acquisition of another company at another place and cannot be unrealistically extended to fit in the definition of input service. I further observe that the case laws cited by the appellant in their support are not applicable in the instant case as facts and circumstances mentioned in those cases are entirely different inasmuch as in the instant case, the appellant have taken cenvat credit in respect of services which have been used neither in or in relation to the manufacture of final products and clearance of final products nor used for providing an output service.
2. The Counsel for the appellants 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. He relies on the decision of the Mumbai High Court in the case of Coca Cola India Ltd Vs CCE reported in 2009 (242) ELT 116 Bombay. In that case, the impugned service was advertisement services but the observations made by the High Court in Para 25 in particular reproduced below:-
25. The expression Business is an integrated/continuous activity and is not confined restricted to mere manufacture of the product. Therefore, activities in relation to business can cover all the activities that are related to the functioning of a business. The term business therefore, in our opinion cannot be given a restricted definition to say that business of a manufacturer is to manufacture final products only. In a case like the present, business of assessee being an integrated activity comprising of manufacture of concentrate, entering into franchise agreement with bottlers permitting use of brand name by bottlers promotion of brand name, etc. the expression will have to be seen in that context see (i) Pepsi Foods Ltd V Collector 1996 (82) ELT 33 (ii) Pepsi Foods Ltd Vs Collector 2003 (18) ELT 552 (SC).
The Honble Supreme Court in the State of Karnataka V Shreyas Paper Pt Ltd 2006 SCC affirmed the view taken by the Honble Karnataka High Court reported at 2001 (121) STC 738 which inter alia held as under :
Business comprises of the regular and systematic activity with an object of earning of profits. The machinery, plant, building and the land over which they have erected or constructed are only the tools of such business. Assets and liabilities including goodwill are the necessary ingredients to constitute a business besides the stocks and other movable and immovable items connected with the said business.
In Mazgaon Dock Ltd Vs Commissioner of Income-tax and Excess Profits Ta AIR 1958 SC 861 the Honble Supreme Court held as follows:
14.The word business is as has often been said, one of the wide import and in fiscal statutes, it must be construed in a broad rather than a restricted sense.
15. The word business connotes, it was observed by this court in Narain Swadeshi Weaving Mills V Commissioner of Excess Profits Tax 1955 1 SCR 952 some real, substantial and systematic or organized course of activity or conduct with a set purpose.
The term business therefore, particularly in fiscal statutes, is of wide import.
3. The Counsel further relies on the decision of Nagpur Bench of High Court of Judicature at Bombay in the case of CCE Nagpur Vs Ultratech Cement Ltd reported in 2010 (20) STR 577 (Bom). He relies on para 35 of the order which is reproduced below:-
35. The argument of the Revenue, that the expression such as in the definition of input service is exhaustive and is restricted to the services named therein, is also devoid of any merit, because, the substantive part of the definition of input service as well as the inclusive part of the definition of input service purport to cover not only services used prior to the manufacture of final products, subsequent to the manufacture of final products but also services relating to the business such as accounting, auditing..etc. Thus the definition of input service seeks to cover every conceivable service used in the business of manufacturing the final products. Moreover, the categories of services enumerated after the expression such as in the definition of input service do not relate to any particular class or category of services, but refer to variety of services used in the business of manufacturing the final products. There is nothing in the definition of input service to suggest that the Legislature intended to define that expression restrictively. Therefore, in the absence of any intention of the legislature to restrict the definition of input service to any particular class or category of services used in the business, it would be reasonable to construe that the expression such as in the inclusive apart of the definition of input service is only illustrative and not exhaustive. Accordingly, we hold that all services used in relation to the business of manufacturing the final product are covered under the definition of input service and in the present case, the outdoor catering services being integrally connected with the business of the manufacture of cement, credit of service tax paid out on catering services has been rightly allowed by the Tribunal.
4. The Counsel 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, he 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. He also argues that raising of capital for the company is covered because financing is covered specifically in the definition.
5. The learned DR on the other hand, reiterates the order of lower authorities.
6. The learned DR argues that acquisition of a factory for use in future have 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. He relies on the following case laws to support his argument:-
Maruti Suzuki Ltd 2009 (242) ELT 641 Manik Chand Vs CCE Nagpur 2010 (20) STR 456
7. He also submits that credit was taken based on an invoice addressed to their registered office and therefore, the Appelant should have taken registration as input service distributor as defined at Rule 2(m) of the Cenvat Credit Rules, 2004. The DR 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. He 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.
8. The DR states that catering provides in the factory and advertising may have some direct nexus with the goods manufactured, but management consultancy and service in relation to raising of capital have no direct or indirect nexus.
9. Considered arguments of both sides.
10. In the first place, I notice a factual error in the finding of the Commissioner (Appeals) at para 7 of his order 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.
11. In the case of Ultratech Cement, the Honble High Court has clearly rejected that the service mentioned is illustrative and not exhaustive. Having given under Rule 2(l) 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, I do not see any merit in the argument that the cenvat credit taken relates to services of future business of the company.
12. Regarding the issue that credit was taken in the factory based on an invoice issued in the name of the registered office, I observe 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.
13. I also do 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. I respectfully follow the ratio in the matter and I allow the appeal filed by the appellant with consequential relief.
(Order dictated and pronounced in the open Court.) (MATHEW JOHN) Technical Member MPS* 8