2012 (9) TMI 210 - AT - Central Excise

Utilization of Cenvat Credit for discharging the deemed liability - Held that - The Cenvat Credit availed on manufacturing activity can be utilized for discharging the deemed liability on commission paid to foreign agents under Business Auxiliary Services as decided in Commissioner, Central Excise Commissionerate. Versus M/s Nahar Fibres 2010 (8) TMI 766 - PUNJAB AND HARYANA HIGH COURT - in favour of assessee.

Summary

Issues:
1. Whether the appellant is entitled to Cenvat credit for discharging service tax liability?
2. Whether Cenvat credit can be utilized for discharging tax liability on commission paid to foreign agents under Business Auxiliary Services?
3. Whether Rule 5 of Taxation of Services Rules, 2006 mentions such set off?

Analysis:

1. The appellant argued that the discharge of service tax liability by a recipient of taxable service entitles them to enjoy Cenvat credit. The counsel referred to a judgment by the Hon'ble High Court of Punjab & Haryana in favor of the assessee, stating that there has been no significant change in the law since then. The appellant's case was considered similar and deserving of Cenvat credit benefits.

2. The Revenue opposed the appellant's claim, citing the absence of any mention in Rule 5 of Taxation of Services Rules, 2006 regarding such set off. However, the Tribunal noted that the question framed by the High Court in a previous appeal was whether Cenvat credit availed on manufacturing activity could be used for discharging liability on commission paid to foreign agents under Business Auxiliary Services. The Tribunal affirmed the affirmative answer to this question, emphasizing that there had been no change in the law to deny the appellant Cenvat credit benefits.

3. After hearing both sides and examining the records, the Tribunal concluded that there was no basis to agree with the Revenue's opposition. The Tribunal reiterated the High Court's stance on the utilization of Cenvat credit for discharging tax liability on commission paid to foreign agents under Business Auxiliary Services. As there was no change in the law and the question was answered affirmatively, the Tribunal allowed the appeal, granting the appellant the Cenvat credit benefit.

This judgment highlights the importance of understanding the legal provisions and precedents in tax matters, particularly regarding Cenvat credit entitlement and utilization for discharging tax liabilities on specific services.