Karnataka High Court Upholds Tribunal's Decision on Service Tax Credit Dispute

The Revenue's appeal against the credit of service tax on business auxiliary service provided by a Commission Agent was dismissed by the Karnataka High Court, upholding the Tribunal's decision. The cross-objection filed by the respondent challenging the denial of credit on service tax paid for Chartered Accountant service was successful, with the Tribunal setting aside the denial of credit and revoking the penalty imposed, ruling in favor of the respondent.

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Issues:
1. Appeal against the credit of service tax on business auxiliary service provided by Commission Agent.
2. Cross-objection challenging the denial of credit on service tax paid for Chartered Accountant service and imposition of penalty.

Analysis:
1. The appeal was filed by the Revenue challenging the order allowing the credit of service tax on business auxiliary service provided by a Commission Agent. The Revenue contended that the lower authority relied on a decision of the Larger Bench of the Tribunal in a previous case. However, the Revenue did not accept the decision of the Larger Bench and had filed an appeal before the Hon'ble High Court of Karnataka. The Hon'ble Karnataka High Court upheld the decision of the Tribunal in the case of ABB Ltd., which was the basis of the lower authority's decision. Therefore, the Tribunal found no merit in the Revenue's appeal and dismissed it.

2. The respondent filed a cross-objection against the impugned order, challenging the denial of credit amounting to Rs.3,338 on the service tax paid for Chartered Accountant service, along with the imposition of a penalty of Rs.2,000. The Tribunal noted that the service tax in question related to accounting and auditing, falling within the scope of input service as defined under Rule 2(l) of the Cenvat Credit Rules. Consequently, the Tribunal set aside the denial of credit amounting to Rs.3,338 and also revoked the interest and penalty imposed. The cross-objection filed by the respondent was allowed, thereby ruling in favor of the respondent on this issue.

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