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)

AI Summary

Company Challenges Denial of Cenvat Credit on Service Tax for Investment Disposal; Seeks Clarification on Tax Department's Position. A manufacturing company disposed of its investments in a joint venture and paid a commission to agents, incurring service tax on this commission. The company claimed cenvat credit for this service tax against its service tax liability on output services. However, the tax department contends that the investment disposal does not relate to the company's business activities, thus disqualifying it from claiming cenvat credit. The company seeks clarification on the department's position, questioning its validity. A respondent suggests that the department's stance might be correct but requires more information to provide a definitive judgment.