By TIOL News Service

MUMBAI, JAN 09, 2014: CENVAT credit amounting to Rs.4.69 crore has been denied by the CST, Mumbai-I and sought to be recovered from the appellant along with interest thereon and also equivalent amount of penalty.

The Bank is before the CESTAT.

It is submitted that service tax credit availed can be categorised into three, namely, Insurance Auxiliary Service, Real Estate Agent's Service and Event Management Service.

++ Insurance Auxiliary Service (CENVAT credit Rs.3.45 crores):- Service relates to group insurance policy provided by the appellant to their employees and forms part and parcel of the salary and other perks provided to the employees, which is a business expenditure as far as the bank is concerned, and hence qualifies as ‘input service' under Rule 2(l) CENVAT Credit Rules, 2004.

++ Real Estate Agent Service (CENVAT credit Rs.16.35 lakhs):-Service has been availed to provide accommodation to their employees. It is contended that it also would form part of the employee's perk and therefore, would be eligible for CENVAT credit.

++ Event Management Service (CENVAT credit Rs.1.08 crore):- Service is for the various events conducted by the event manager for retaining of the existing customers and for promotion of the business of the appellant to attract newer customers; even movie tickets have been bought and supplied to attract and induce customers; being a business promotional activity, it is an eligible input service under Rule 2(l) of the CENVAT Credit Rules.

The appellant further informs that they have reversed an amount of Rs.1.62 crore during investigation and the same should be considered sufficient for the grant of stay.

The Revenue representative submitted that there is no direct nexus between the services availed and the output service provided by the bank and, therefore, the appellant should be put to terms.

The CESTAT observed -

"5. …As regards the Insurance Auxiliary Service, this service is for providing group insurance policy, which is a part and parcel of the salary and perks given to the employees and, therefore, it would qualify as an eligible input service for CENVAT credit. As regards the Real Estate Agent Service, even though the appellant claims that it is towards part of the employees perks, there can be a dispute whether it is a service activity or a welfare activity. In the case of Event Management Service, the claim of the appellant is that the events are conducted to attract customers and to promote business of the bank, but from the nature of the events conducted, prima facie, we are not convinced that the events have been conducted to attract business for the bank. Buying movie tickets and supplying the same, by no stretch of imagination, can be considered to be promotion of business activities. With regard to Real Estate Agent Service and Event Management Service, the credit availed is only Rs.1.25 crore approximately. Inasmuch as the appellant has already reversed an amount of Rs.1.62 crore, the same would be sufficient for hearing of the appeal."

In fine, the Bench granted waiver from pre-deposit of the balance of the adjudged dues and granted a stay in the matter.

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(See 2014-TIOL-46-CESTAT-MUM)