By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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CENVAT credit of service tax paid by the assessee cannot be denied merely because part of cost of input services is reimbursed by parent company – Financial arrangement between subsidiary and parent company has no connection or relevance for legality of CENVAT credit.
Facts:
The assessee procured the service of advertising agency for purpose of advertising their final product. Entire value of service of advertising agency along with service tax was paid thereby making them eligible for CENVAT credit. A part of the advertising expenditure incurred by the assessee was reimbursed to it by its parent company located abroad. Department denied credit on ground that the assessee’s foreign holding/parent company had reimbursed part of such advertisement expenses.
Held:
The Tribunal observed that the Commissioner had not given a finding that advertising cost was not incurred by the appellants. Therefore, it was held that merely because the appellants’ parent company reimbursed part cost of the advertising expenses, it did not mean that the appellants would become disentitled to the service tax actually paid by them. The financial arrangement between the subsidiary company and the parent company had no connection for the purpose of availability of credit of service tax paid by the assessee. Procurement of finances for running any business was the subject matter between two individuals. Thus, credit is allowed.
