2011 (7) TMI 855 - AT - Central Excise

Demand - Commission agent service - In the impugned order learned Commissioner has taken a view that service tax credit for commission agent services is not admissible because it has been given to the dealers and such commission has been claimed as a discount - According to the show cause notice the demand was made on the ground that the services received from selling agents did not have any nexus with the manufacture and clearance of final product from the place of removal and service was beyond stage of manufacture and clearance of goods and therefore cannot be considered as input service - Decided in favor of the assessee

Summary

Issues:
Challenge to demand for service tax credit on commission agent service, interest, and penalty.

Analysis:
The appellants contested the demand for service tax credit on commission agent service, interest, and penalty. The Revenue argued that the cenvat credit availed by the appellants for service tax paid and commission paid to selling agents cannot be considered as input service as it lacks nexus with the manufacturer and clearance of final products. The appellants relied on decisions by the Hon'ble High Court of Mumbai and this Tribunal to support their claim that service tax credit for services related to business activity is admissible. The Revenue contended that the commission paid to dealers did not form part of the transaction value and should not be considered for credit. The Tribunal noted discrepancies in the show cause notice and the Commissioner's observations, emphasizing that the demand was based on the lack of nexus with manufacturing and clearance activities. The Tribunal found in favor of the appellants, citing relevant decisions that support the admissibility of service tax credit for sales promotion activities by commission agents.

The Tribunal highlighted that the decisions of the Hon'ble High Court of Mumbai regarding the scope of input service and activities in relation to business were applicable in this case. It was emphasized that sales promotion is an integral part of business activity, and the nexus with manufacturing activity need not be explicitly proven for input services. The Tribunal also referenced a previous decision where service tax paid on commission for sales promotion by foreign agents was deemed admissible as cenvat credit, indicating a similar treatment for domestic commission agents. The Tribunal disregarded the Revenue's reliance on Tribunal decisions that did not consider the High Court's rulings. Ultimately, the appeal was allowed in favor of the appellants, granting them consequential relief.