Tribunal allows Cenvat credit on Business Auxiliary Service from abroad, deems denial unsustainable

The Tribunal ruled in favor of the appellant, allowing the Cenvat credit on Business Auxiliary Service (BAS) availed from abroad. The appellant's argument that the credit cannot be denied if the cost is included in the cost of production was supported by a previous decision. The Tribunal found that the services were used in relation to business activities and deemed the denial of credit on BAS used in a foreign land unsustainable. As a result, the demand was set aside, and the penalty imposed was deemed unsustainable, leading to the allowance of the appeal.

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Issues:
Denial of Cenvat credit on Business Auxiliary Service (BAS) availed from abroad.

Analysis:
The appellant, a manufacturer of Aluminium Castings, appealed against the denial of Cenvat credit on BAS availed from abroad. The impugned credit of Rs. 9,279 was disallowed by the adjudicating authority, stating it was not used in or in relation to the manufacture of final products. The appellant argued that Cenvat credit of input services cannot be denied if its cost is included in the cost of production, even if availed outside the factory premises. They relied on a decision by the Ahmedabad Bench of the Tribunal to support their claim. The Ld. AR reiterated the findings of the authorities and supported the denial of credit on BAS used in foreign land.

The Tribunal found that the appellant used the services of a logistics company to store and deliver goods to customers. The original authority denied the service tax credit for this transaction, which was upheld by the Commissioner (Appeals). However, the Tribunal noted that the period involved in the appeal was prior to an amendment that imposed a bar on utilizing credit on reverse charge mechanism. The goods were sent to the logistics company in China for repacking and onward supply to buyers. The Tribunal concluded that the credit for service tax paid on such services would be admissible, as the logistics company's warehouse was the place of removal.

Citing a previous decision by a co-ordinate Bench of the Tribunal, the Tribunal held that credit is admissible on input services used in relation to business activities, such as those provided by a commission agent. Therefore, the Tribunal ruled in favor of the appellant, stating that they were entitled to the benefit of Cenvat credit on BAS service used in relation to their business activity in a foreign land. Consequently, the demand was set aside, and the penalty imposed was deemed unsustainable. The impugned order was set aside, and the appeal was allowed.

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