cenvet credit of service tax paid on investment disposals

[SPIC Ltd.]

Dear Sir

We wish to state that the assessee company viz. a manufacturing unit, has disposed of its investments in a joint venture company and paid a commission to the agents who have facilitated this transfer. The agents claimed service tax on the commission payable to them by the company. The company availed the cenvat credit on the service tax paid by it in this transaction against its service tax liability on the output services rendered by it. In this connection, it is also pertinent to note that the company had invested in various group companies in the form of equity capital or bonds which was done in the course of its business and for its business development. The Department has taken a view that disposal of investments in other group companies does not have any nexus with the business of the assessees and therefore not entitled for cenvat credit on the service tax paid on the commission. Kindly clarify whether the stand taken by the Department is in order. We shall be much thankful for your clarification duly supported by judicial decisions.

Regards

K. Govindan

Chief Manager (Taxation)

[Brijesh Verma]

Hello Mr. Govindan

Please inform us about the exact nature of output services. Prima facie it appears that the stand taken by department is right. But it would be very difficult for us to judge the same unless more information is gathered. You can write us at [email protected]

AI Summary

Cenvat credit for commission on investment disposals depends on whether the services have a business nexus enabling input service eligibility. Question whether cenvat credit is admissible for service tax paid on commission to agents for disposal of investments where the Department contends disposal of investments in group companies lacks the requisite business nexus; admissibility depends on whether the intermediary services qualify as input services used in providing or facilitating the assessee's taxable output services or in the course of its business.