2009 (7) TMI 633 - AT - Service Tax

CESTAT Mumbai Grants Cenvat Credit on Commission Paid to Agent

The CESTAT Mumbai allowed the appeal, granting the appellant Cenvat credit on commission paid to a commission agent for service tax. The tribunal held ... Cenvat credit of service tax - commission agent service as an integrated service - prohibition on bifurcation of services into pre- and post-clearance - Rule 2(l) of Cenvat Credit Rules, 2004 - precedential reliance on Bhilai Auxiliary IndustriesCenvat credit of service tax - commission agent service as an integrated service - prohibition on bifurcation of services into pre- and post-clearance - Rule 2(l) of Cenvat Credit Rules, 2004 - Admissibility of Cenvat credit of service tax on commission paid to a commission agent for the period April, 2006 to January, 2007. - HELD THAT: - The Tribunal found that the lower authorities erred in bifurcating the commission agent's functions into pre-clearance (procurement of purchase orders) and post-clearance (collection of sale price) and denying credit for the latter. The commission agent's service was held to be an integrated service which cannot be split for the purpose of denying Cenvat credit. Neither authority disputed coverage of the commission agent service under Rule 2(l) of the Cenvat Credit Rules, 2004. The Tribunal relied on its earlier decision in Bhilai Auxiliary Industries to conclude that the assessee is entitled to Cenvat credit on the entire commission paid during the period in dispute. A decision cited by the Department (International Tractors Ltd. v. CCE) was examined and found to address a different issue and thus inapplicable to the facts here.Impugned order set aside; assessee entitled to Cenvat credit on the entire commission paid for the period April, 2006 to January, 2007; appeal allowed and pre-deposit dispensed with.Final Conclusion: The Tribunal allowed the appeal, set aside the orders denying part of the Cenvat credit, and held that service tax paid on commission to commission agents for April, 2006 to January, 2007 is admissible in full as the commission agent's service is an integrated service; reliance placed on the Tribunal's prior decision in Bhilai Auxiliary Industries. The appellate tribunal, CESTAT, Mumbai, led by P.G. Chacko, Judicial Member, heard an appeal regarding a show-cause notice which confirmed a demand against the assessee for service tax, education cess, interest, and penalty. The original authority's decision was upheld by the first appellate authority, prompting the present appeal. The key question was whether Cenvat credit of service tax on commission paid to a commission agent was admissible. The lower authorities had restricted this benefit, but the tribunal ruled that the commission agent's service was an integrated whole and not divisible as suggested. The appellant was thus entitled to the Cenvat credit for the entire commission paid. The tribunal found that the issue was already settled in favor of the appellant by a previous case law and allowed the appeal, setting aside the impugned order. The decision was based on the fact that the commission agent service was covered by the Cenvat Credit Rules, 2004, and should not have been divided as done by the lower authorities. The appellant was granted the benefit of the Cenvat credit on the commission paid to the agent for the service received during the disputed period. The case law cited by the appellant's counsel supported this decision, and there was no evidence to suggest that the department had not accepted the Tribunal's previous ruling on the matter. Therefore, the appeal was successful.