2010 (9) TMI 398 - AT - Service Tax

Waiver of pre-deposit Cenvat credit of service tax - Commissioner relied upon the certificate of auditors and allowed the cenvat credit in relation to order passed for the earlier period by the Commissioner - show cause notice order n original, prima-facie, discloses that the proceedings were sought to be initiated for the want of documentary proof in relation to availment and utilization of the cenvat credit, whereas the denial under the impugned order - prima facie, it is difficult to accept the contention of the Department that the commission paid in advance could be considered as the payment for the service provided even prior to actual rendering of the service - prima facie case has been made out by the appellants for grant of stay of the impugned order

Summary

Issues:
1. Disallowance of cenvat credit
2. Valuation aspect regarding service tax liability

Analysis:

1. Disallowance of Cenvat Credit:
The challenge to disallowance of the cenvat credit was based on the grounds that the impugned order exceeded the scope of the show cause notice by denying the credit on the basis of eligibility criteria rather than lack of necessary documentary proof. The appellants argued that the inclusion of commission received in advance for services yet to be provided was contrary to the law on service tax liability. The Chartered Accountant highlighted a previous order by the Commissioner in favor of the appellants based on auditors' certified accounts, contrasting it with the rejection in the current case without valid reasons. The Tribunal noted that in a previous period, the Commissioner had allowed cenvat credit based on auditors' certificates, emphasizing the importance of such certificates as evidence for credit eligibility. The Tribunal found that the denial of credit in the impugned order seemed to be based on eligibility criteria rather than lack of documentary proof.

2. Valuation Aspect Regarding Service Tax Liability:
Regarding the valuation aspect, the Department argued that the Commissioner relied on an explanation clause to Rule 6(1) of the Service Tax Rules, clarifying that service tax must be paid on the value of the service attributable for the relevant period even if the value was received in advance. The Chartered Accountant pointed out that this explanation was no longer in effect from September 12, 2007, and argued that commission paid in advance could not be considered payment for services provided before actual rendering. The Tribunal observed that the explanation seemed to support the appellants' contention that advance commission should not be taxed as payment for services already rendered. The Tribunal made prima facie findings in favor of the appellants, granting a stay on the amount demanded under the impugned order until the appeal's disposal.

In conclusion, the Tribunal found a prima facie case in favor of the appellants for the grant of stay on the impugned order. The decision highlighted the importance of auditors' certificates as evidence for cenvat credit eligibility and raised doubts about taxing advance commissions for services yet to be provided. The Tribunal's analysis focused on the discrepancies between the show cause notice, the impugned order, and the previous rulings, emphasizing the need for clarity and consistency in decision-making processes in tax matters.