Input credit of service tax paid on commission to commssion agent for geting enquiry, participating in tender and for booking of order before start manufacturing activities

[SHAHID HASHMI]

We are engaged in the manufacture and exporting of Power Cables falling under Heading No. 8544 of the First Schedule to the Central Excise Tariff Act, 1985. We start manufacturing activities of our products only after getting Order from the domestic as well as from out side India and after approval of data sheet / specifications from clients/buyers.

We are not selling any ready made goods in the market. We paid commission to our commission agent in helping to get enquiry from clients, participating in tender and for procuring/booking sales order. All the above activities have been done by our commission agent before start of our production and there is no link with the activities of post sales.

Please advise whether Service tax paid to commission agent on above activities fall under the definition of input service as laid down in the Rule 2(1) of CENVAT credit Rule 2004, and can we avail input credit of service tax paid on the commission to commission agent. Whether the decision of Hob’ble High Court of Gujarat in the case of CCE, Ahmadabd-II v. M/s. Cadila Healrth Care will be applicable in our case.

[Mahir S]

Sir,

As per amended definition, the word 'setting up' has been deleted from the input credit definition, hence credit is not eligible for any activity relating to setting up of business i.e. services utilized prior to manufacture/production of goods.

AI Summary

Input service credit ineligibility for pre-production commission payments after amendment excludes services used before manufacture begins. Whether service tax paid to a commission agent for obtaining enquiries, participating in tenders and booking orders before manufacturing begins qualifies as an Input Service under Rule 2(1) of the CENVAT Credit Rules, 2004. The amendment removing the term 'setting up' limits credit to services used in connection with manufacture and excludes services utilised prior to commencement of production, rendering such pre-production commission payments ineligible for CENVAT credit.