Cenvat credit on commission invoices upheld where service tax was duly paid and accepted at the supplier's end.

Cenvat credit could not be denied to the recipient where service tax on commission invoices had already been discharged by automotive dealers and accepted by the jurisdictional authorities. The Tribunal held that once the tax liability at the supplier's end stood assessed and the invoices reflected taxable services, consequential credit could not be rejected merely because the department questioned the underlying commission arrangement. An IRDA clarification supporting the outsourcing arrangement was also noted as relevant and not open to disregard by the revenue. The alleged bar on commission under Section 40 of the Insurance Act did not affect credit entitlement when the tax had reached the Government, so the demand, interest, and penalty failed.

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Issues: Whether the appellant was entitled to Cenvat credit of service tax paid by automotive dealers on commission invoices, and whether such credit could be denied on the ground that the commission arrangement was alleged to be impermissible under the Insurance Act.

Analysis: The service tax paid by the automotive dealers had been accepted by the jurisdictional authorities, and the invoices reflected taxable services on which tax had already been discharged. Once the tax liability at the dealers' end stood assessed and accepted, the recipient could not be denied consequential credit merely because the department questioned the underlying commercial arrangement. The Tribunal also noted that the regulatory clarification issued by IRDA supported the manner in which the outsourcing arrangement was being carried out, and such clarification could not be ignored by the revenue authorities. The finding that commission could not be paid under Section 40 of the Insurance Act, 1938 did not affect the credit entitlement when tax had admittedly reached the Government.

Conclusion: The appellant was entitled to avail the Cenvat credit, and the demand, interest, and penalty could not be sustained.

Final Conclusion: The impugned order was set aside and the appellant succeeded on the credit eligibility issue.

Ratio Decidendi: Where tax has been duly discharged on taxable invoices and accepted by the department at the supplier's end, consequential Cenvat credit cannot be denied to the recipient on a challenge to the underlying transaction arrangement.

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