Directors' remuneration treated as creditable service tax, since commission paid for board services is not taxable consultancy consideration.

Service tax paid on amounts described as commission but paid to directors for their performance as directors was treated as remuneration, not commission to an agent or taxable consultancy consideration. The Board circular and prior Tribunal decisions were followed to hold that such payments do not fall within Business Auxiliary Service or Management Consultancy Service when made for acting as directors. On that basis, the service tax paid on the directors' remuneration was held eligible for Cenvat credit.

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Issues: Whether service tax paid on commission paid to directors, as remuneration under the articles of association and board resolution, was eligible for Cenvat credit.

Analysis: The commission paid to the directors was found to be remuneration for their role as directors and a participation in profits, not a sales commission paid to a commission agent. The Board circular clarified that amounts paid by a company to its managing directors or directors, even if termed as commission, do not fall within the scope of Business Auxiliary Service and are not chargeable under Management Consultancy Service when paid for performance as directors. The reasoning in earlier Tribunal decisions was followed to hold that such payment retains the character of remuneration and the service tax paid thereon is eligible as credit.

Conclusion: The appellant was entitled to Cenvat credit on the service tax paid on the amount paid to its directors.

Ratio Decidendi: Amounts paid to directors for their performance as directors, though described as commission, are remuneration and not commission to an agent or taxable consultancy consideration; service tax paid on such remuneration is available as credit.

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