Relief for HUL: CESTAT rules 'Management Consultancy' and 'Business Support Services' Qualify as Input Services for CENVAT Credit [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that 'Management or Business Consultant’s Service' and 'Business Support Service' qualify as input services and are eligible for CENVAT credit under Rule 2(l) of the CENVAT Credit Rules, 2004.

Hindustan Unilever Ltd., the appellant, is engaged in the manufacture of soaps and detergents at its Puducherry unit. The appellant availed CENVAT credit based on Input Service Distributor (ISD) invoices issued by its Mumbai head office for various input services during the period from August 2010 to June 2011.

These services included advertising, brand promotion, manpower recruitment, business support and management consultancy. The department issued eight show-cause notices, alleging that certain services were not used directly or indirectly in or in relation to the manufacture or clearance of final products and did not qualify as input services.

After considering the appellant’s reply, the adjudicating authority allowed credit for most of the services. The department disallowed credit for 'Management or Business Consultant’s Service' and 'Business Support Service' and imposed proportionate penalties under Rule 15(1) of the CENVAT Credit Rules. The appellant filed appeals before the CESTAT against this disallowance. The department did not file any appeal against the allowed portion of the credit.

The appellant’s counsel argued that both the disallowed services were used in relation to the business of manufacturing and should be covered under the inclusive part of the definition of input service.

The counsel relied on the decision of the Bombay High Court in Coca Cola India Pvt. Ltd. v. CCE, which held that business is an ongoing activity and the definition of input service includes a wide range of activities relating to business.

The two-member bench comprising P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member) observed that the inclusive definition of input service under Rule 2(l) covered various services used in or in relation to business operations.

The tribunal referred to the decisions of both the Bombay and Madras High Courts, which had upheld a broader interpretation of input services. The tribunal pointed out that the department had accepted similar services as eligible and had not appealed against those parts of the order.

The tribunal held that the disallowance of credit on 'Management or Business Consultant’s Service' and 'Business Support Service' was not sustainable.

The impugned orders were set aside and the appeals were allowed with consequential relief.

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