2008 (12) TMI 134 - AT - Service Tax

Tribunal allows Cenvat credit for service tax on commission paid to agents

The Tribunal upheld the Commissioner (Appeals)'s decision, allowing Cenvat credit for the service tax paid on the commission received by commission ... Input service - Cenvat credit - services of commission agents as sales promotion - availability of service tax credit on commission paid to commission agents - interpretation of the inclusive part of the definition of input serviceInput service - services of commission agents as sales promotion - availability of service tax credit on commission paid to commission agents - Whether the manufacturer is entitled to Cenvat credit of service tax paid by commission agents on commission received by them - HELD THAT: - The Tribunal held that the services rendered by commission agents who procure orders for the manufacturer are in the nature of sales promotion. Rule 2(1) of the Cenvat Credit Rules, 2004 defines 'input service' to include services used by a manufacturer directly or indirectly in or in relation to manufacture of final products and clearance of final products from the place of removal and additionally contains an inclusive part covering services such as advertisement or sales promotion. Applying this inclusive limb, the services of commission agents qualify as 'input services' and therefore the service tax paid on the commission received by such agents is available as Cenvat credit to the manufacturer. The Tribunal noted that earlier decisions of the Tribunal have taken the same view and concluded that the Commissioner (Appeals) correctly allowed the Cenvat credit in respect of the service tax on commission.Cenvat credit of service tax paid on commission to commission agents is admissible to the manufacturer; the Commissioner (Appeals) was right in allowing the credit.Final Conclusion: The Revenue's appeal against the Commissioner (Appeals)'s allowance of Cenvat credit of service tax on commission paid to commission agents is dismissed; the Tribunal affirms that such services qualify as 'input services' and the credit is admissible. Issues:1. Eligibility for Cenvat credit on service tax paid by commission agents.2. Interpretation of the definition of 'input service' under Cenvat Credit Rules, 2004.3. Disallowance of Cenvat credit on outward freight.Analysis:Issue 1: Eligibility for Cenvat credit on service tax paid by commission agentsThe case revolved around whether the Respondent, availing the services of commission agents, could claim credit for the service tax paid by the commission agents on the commission received by them. The Deputy Commissioner disallowed a portion of the credit, leading to a penalty imposition. The Commissioner (Appeals) upheld the disallowance of credit on outward freight but allowed the credit on the commission. The Revenue appealed against this decision.Issue 2: Interpretation of the definition of 'input service'The Departmental Representative argued that post-removal activities were not covered under the definition of 'input service.' On the contrary, the Respondent's Counsel contended that services provided by commission agents, akin to sales promotion, fell under the inclusive part of the definition. They cited relevant Tribunal judgments supporting their stance.Issue 3: Disallowance of Cenvat credit on outward freightThe Commissioner (Appeals) confirmed the disallowance of credit on outward freight but set aside the disallowance concerning the service tax on the commission received by commission agents. The Tribunal, after considering both parties' submissions, concluded that the commission agents' services constituted sales promotion, falling within the definition of 'input service.' The Tribunal referenced prior judgments supporting this interpretation, ultimately dismissing the Revenue's appeal.In conclusion, the Tribunal upheld the Commissioner (Appeals)'s decision, allowing the Cenvat credit for the service tax paid on the commission received by the commission agents. The judgment emphasized that such services qualified as 'input services' under the Cenvat Credit Rules, 2004, aligning with the inclusive part of the definition covering sales promotion activities. The case highlighted the importance of a broad interpretation of 'input service' to encompass various activities contributing to the manufacturing process.