CENVAT credit on commission agent services denied; extended limitation challenge found prima facie tenable at pre-deposit stage.

Commission agent services used for selling final products were treated as direct sales services, not sales promotion or activities relating to business within the inclusive limb of input service, so CENVAT credit on service tax paid on such services was held inadmissible. On limitation, the Tribunal found prima facie merit in the challenge to invocation of the extended period for pre-deposit purposes, noting the earlier tribunal view and the subsequent contrary High Court ruling. The demand was not finally decided on merits at this stage, and only partial interim relief was granted with a reduced pre-deposit and stay of the balance demand.

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Issues: (i) Whether service tax paid on commission agents' services is eligible for CENVAT credit as input service. (ii) Whether the demand raised by invoking the extended period of limitation was, at the pre-deposit stage, prima facie open to challenge.

Issue (i): Whether service tax paid on commission agents' services is eligible for CENVAT credit as input service.

Analysis: The relevant definition of input service covered services used directly or indirectly in or in relation to manufacture and also included services such as advertisement, sales promotion and activities relating to business. The Tribunal followed the Gujarat High Court view that commission agents merely facilitate sales and are directly concerned with sale of goods rather than sales promotion. Their services were held not to be analogous to the illustrative business activities listed in the definition, and therefore not within the inclusive limb of input service.

Conclusion: CENVAT credit on service tax paid to commission agents was not admissible, and the issue was decided in favour of Revenue and against the assessee.

Issue (ii): Whether the demand raised by invoking the extended period of limitation was, at the pre-deposit stage, prima facie open to challenge.

Analysis: The Tribunal noted that the larger demand was raised by invoking the extended period, and that the Tribunal's earlier view on the credit issue had been in favour of the manufacturer before the contrary High Court ruling. On that basis, the Tribunal found prima facie merit in the contention that invocation of the extended period was not sustainable for the disputed amount within that stage of consideration.

Conclusion: The challenge to the extended period was accepted only prima facie for the purpose of partial waiver of pre-deposit.

Final Conclusion: The appeal was not finally adjudicated on merits, but the assessee obtained only partial relief at the interim stage by being directed to deposit a reduced amount while the balance demand was stayed.

Ratio Decidendi: Commission agent services used for selling final products do not, by themselves, amount to sales promotion or activities analogous to the illustrative business activities in the definition of input service, and therefore do not qualify for CENVAT credit on service tax paid thereon.

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