2013 (1) TMI 460 - AT - Service Tax

Utilisation of Cenvat credit for payment under Reverse charge - Whether Cenvat credit can be utilized for discharge of Service Tax liability in respect of overseas commission agent - Reverse charge u/s 68(2) on import of service - Rule 2(1)(d)(iv) - Rule 3(4)(e) of Cenvat Credit Rules, 2004 - Rule 2(p) of Cenvat Credit Rules Rule 2(r) of Cenvat Credit Rules - Assessee engaged in manufacturer of acrylic fibre, acrylic top etc. - from April, 2007 to September 2008 - Held that - Following the decision in case of M/s. Shree Rajasthan Syntex Ltd.(2011 (8) TMI 265 - CESTAT, NEW DELHI) that it is not in dispute that as recipient of service from GTA, the appellant is liable to pay service tax by virtue of notification u/s 68(2). If the appellant is the person liable to pay service tax, he would be deemed to be provider of taxable service by fiction of law and, therefore, the service provided by him will be deemed to be output service under Rule 2(p) of the Rules. Therefore, the appellant is entitled to utilise the Cenvat credit for discharge of Service Tax for the commission paid to the overseas agents. In favour of assessee

Summary

Issues:
1. Utilization of Cenvat credit for Service Tax liability on overseas commission agent.
2. Interpretation of Rule 3(4)(e) and Rule 2(r) of Cenvat Credit Rules.
3. Impact of deletion of Explanation to Rule 2(b) on Cenvat credit utilization.
4. Applicability of Tribunal and High Court decisions on Cenvat credit utilization.

Analysis:
The judgment by the Appellate Tribunal CESTAT, New Delhi addressed the issue of utilizing Cenvat credit for Service Tax liability on overseas commission agents. The appellant, a manufacturer of acrylic products, availed Cenvat credit on duty paid inputs and services, including foreign agents' commissions. The dispute centered on whether the appellant could use Cenvat credit for Service Tax on overseas commission agents. The lower authorities denied this based on Rule 3(4)(e), arguing the appellant was not a taxable service provider. The Revenue contended that post-deletion of the Explanation in Rule 2(p), the appellant couldn't claim output service provider status.

The Tribunal considered precedents and observed that Cenvat credit could be used for GTA services, akin to commission agents, pre-19.4.06. However, post-19.4.06, the Explanation to Rule 2(b) was deleted, raising questions on Cenvat credit entitlement. The Revenue cited cases like Iswari Spinning Mills and Gimatex Industries to support disallowing credit post-18.4.06. Conversely, the Tribunal referred to National Engg. Inds. Ltd. and Shree Rajasthan Syntex Ltd. decisions, asserting credit utilization pre-1.3.08 was permissible under Rule 2(r).

The Tribunal analyzed Rule 2(r) and concluded that the appellant, liable for Service Tax as a service recipient, qualified as a provider of taxable service. Since Rule 2(r) remained unchanged during the relevant period, the Tribunal upheld the appellant's right to use Cenvat credit for overseas commission agent Service Tax. Citing the division bench's reasoning from Shree Rajasthan Syntex Ltd., the Tribunal allowed the appeals, setting aside the impugned orders and granting relief to the appellants.