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CENVAT - Rule 2(l) - Services namely, Brokerage for sale or purchase of shares for Trading, Custodian charges, Event management are in nature of input services having nexus to business activity of Banking - stay granted: CESTAT

By TIOL News Service

MUMBAI, NOV 26, 2014: AGAINST the order passed by the CCE, Thane-I denying CENVAT credit taken of the service tax paid on various services,of Rs.4,88,93,874/-, along with every other pecuniary provision that can go along with it, the Bank is before the CESTAT with an application for Stay.

The facts are that applicant is a banking company engaged in providing banking and financial services to their clients. To provide these services the applicants are required to maintain CRR (Cash Reserve Ratio) and SLR (Statutory Liquidity Ratio) as per guidelines 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. On these charges the service provider is paying service tax and the appellant has taken CENVAT credit of the tax paid on such services. They have also 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 availed CENVAT Credit on maintenance charges for residential flat of Managing Director.

It is the view of the Revenue that all these services cannot be considered as input service for providing Banking & Financial Services.

The appellant submitted that the brokerage paid on purchase, sale and investment and custodial charges of Stock Holding Corporation of India Ltd. are statutory expenses to be incurred by the applicant to do their banking business; that on event management charges also they are entitled to take CENVAT credit as these events are carried out to celebrate their anniversary wherein their clients, employees and other persons have participated; in respect of credit taken on documents issued by lead bank as per Rule 4A of the STR, 1994, concession is given to the banking and financial institution; in respect of maintenance charges for residential flat of Managing Director, they have reversed the credit.

The AR justified the denial of CENVAT credit and submitted that the appellant should be put to terms.

The Bench observed -

"6. …, 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…."

Holding so, the CESTAT waived the requirement of pre-deposit of adjudged dues and stayed the recovery during the pendency of the appeal.

(See 2014-TIOL-2357-CESTAT-MUM)


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