Cenvat credit on foreign commission agent services for exports allowed where tractors were cleared under bond.

Cenvat credit on service tax paid for foreign commission agents' services used for exporting tractors was allowed, as the tractors were cleared under bond without payment of duty. The Tribunal applied the liberal approach reflected in Jobelle, which recognised that credit on inputs used for exports should not be denied where goods are exported under bond, and noted the similarity between Rule 6(5) of the CCR, 2002 and Rule 6(6) of the CCR, 2004. In the absence of any contrary higher judicial authority, the impugned denial of credit was set aside and the appeal was allowed.

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Issues: Whether service tax credit on foreign commission agent services used for export of tractors under bond was admissible.

Analysis: The goods were exported without payment of duty. The Tribunal followed its earlier view that the prohibition in Rule 6(1) of the Cenvat Credit Rules does not apply where exempted goods are exported under bond, and that the exception in Rule 6(5) supports allowing credit so that domestic taxes are not exported into the international market. Since Rule 6(5) of the Cenvat Credit Rules, 2002 was treated as analogous to Rule 6(6) of the Cenvat Credit Rules, 2004, and no contrary higher judicial authority was shown, the credit claim was accepted.

Conclusion: The denial of credit was unsustainable and the appeal was allowed.

Final Conclusion: Credit of service tax paid on foreign commission agent services used for exports under bond was held allowable, and the impugned order was set aside.

Ratio Decidendi: Where exported goods are cleared under bond without payment of duty, Cenvat credit on input or input-service tax is not to be denied if the relevant rule creates an export-linked exception and the credit would otherwise burden exports with domestic taxes.

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