2010 (7) TMI 351 - AT - Service Tax

Waiver of pre-deposit cenvat credit of service tax - services of Commission Agent for procuring orders for sale of goods - lower authority found that the impugned credit was not admissible in terms of Rule 2(l) of Cenvat Credit Rules 2004 credit denied on the ground that services received after manufacture and clearance of goods - definition of input service the same would include service tax paid on sales promotion - waiver pre-deposit

Summary

Issues:
- Waiver of pre-deposit and stay of recovery of Rs. 8,20,862/-, applicable interest, and penalty for availing inadmissible input credit during April 2005 to June 2007.

Analysis:
The appellant, engaged in manufacturing corrugated boxes subject to excise duty, sought waiver of pre-deposit and stay of recovery of Rs. 8,20,862/-, interest, and penalty imposed for availing inadmissible input credit. The lower authority found the credit inadmissible under Rule 2(l) of Cenvat Credit Rules, 2004, as the services of the commission agent were not related to the manufacture and clearance of finished goods. The Commissioner (Appeals) concurred, stating that the commission agent's service was post-manufacture and not eligible for credit under Rule 2(l)(ii) of the Cenvat Credit Rules.

In support of the waiver application, the appellant relied on precedents, including a decision where service tax on commission agent's service was deemed admissible as input credit. Conversely, the respondent cited a case where such credit was not allowed. The Tribunal examined Rule 2(l) defining "input service," noting that services like sales promotion fall within its ambit. Additionally, it highlighted that the conflicting decisions were from a Single Member and a Division Bench, indicating an unsettled dispute. Consequently, the Tribunal granted the waiver of pre-deposit and stayed recovery pending the appeal's decision, emphasizing the ambiguity in the interpretation of the law.

This judgment underscores the importance of analyzing the specific nature of services concerning input credit eligibility under the Cenvat Credit Rules. The Tribunal's decision to grant the waiver and stay recovery reflects the nuanced legal interpretation required in such cases, especially when faced with conflicting precedents from different levels of the judiciary. The ruling provides clarity on the application of Rule 2(l) and the need for a definitive resolution of disputes to ensure consistency and fairness in tax matters.