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2015 (2) TMI 272 - AT - Service TaxCenvat Credit - whether Life insurance company can utilize input Credit available with them for payment of service tax against agency commission - whether the appellant can utilize CENVAT credit in excess of 20% of the service tax payable- Held that - only change in the legal provision is the omission of Explanation under Rule 2(p). An Explanation only clarified the position. By omission of the explanation, the meaning does not undergo any change. Therefore, both prior to 19.4.2006 as also w.e.f. 19.4.2006, the meaning of the expression output service', provider of taxable service' and person liable for paying service tax' remain the same. Since in the case of Insurance Auxiliary Service, the liability to pay Service Tax is on the service recipient in terms of Rule 2 (1)(d)(iii) of the Service Tax Rules, 1994, the appellants are the providers of the output service as defined in law. Therefore, the appellants are entitled to avail CENVAT Credit on the input services used for providing the output service. Consequently, there is no bar in utilization of CENVAT Credit for payment of Service Tax on Insurance Auxiliary Service by the appellants. There is no one to one correlation required between the input service and the output service under the CENVAT Credit Scheme and, therefore, the demands confirmed against the appellants for recovery of CENVAT Credit availed by them for discharging Service Tax liability on Insurance Auxiliary Service is clearly unsustainable - Following decision of assessee's own previous case 2014 (4) TMI 637 - CESTAT MUMBAI - Insurance Auxiliary Service falls under sub-clause (zy), which is specified in sub-rule (5) of Rule 6. That being the position, the cap of 20% fixed under Rule 6(3)(c) would not apply to Insurance Auxiliary Service at all and the entire Service Tax Credit can be utilized for discharge of Service Tax. Decided in favour of assessee.
Issues:
1. Alleged wrongful utilization of input credit for payment of Service Tax against Agency Commission. 2. Alleged excess utilization of CENVAT Credit for payment of Service Tax on taxable output service. 3. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994. Issue 1: Alleged wrongful utilization of input credit for payment of Service Tax against Agency Commission The appeal arose from a show-cause notice alleging the appellant, a Life Insurance Company, wrongly utilized input credit for Service Tax payment against Agency Commission. The notice claimed a failure to pay Service Tax amounting to Rs. 5,44,65,756. The impugned order confirmed this demand but dropped the demand for excess utilization of CENVAT Credit. The appellant appealed against the confirmed demand and penalty under Rule 15(3) of Cenvat Credit Rules, 2004. Issue 2: Alleged excess utilization of CENVAT Credit for payment of Service Tax on taxable output service The Revenue appealed against the dropping of the demand for alleged excess utilization of CENVAT Credit amounting to Rs. 6,50,50,594, which violated Rule 6(3)(c) of Cenvat Credit Rules, 2004. The Tribunal referred to previous decisions and legal provisions to establish that the appellants were entitled to avail CENVAT Credit for payment of Service Tax on "Insurance Auxiliary Service." The Tribunal held that demands for recovery of CENVAT Credit were unsustainable and set them aside. It was clarified that the cap of 20% fixed under Rule 6(3)(c) did not apply to Insurance Auxiliary Service, allowing the entire Service Tax Credit to be utilized for discharge of Service Tax. Issue 3: Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994 The Tribunal allowed the appeal of the assessee by setting aside part of the Order-in-Original confirming the demand of Rs. 5,44,65,756 and the penalty of Rs. 10,000 under Rule 15(3) of Cenvat Credit Rules. The appellant was entitled to consequential benefits. The appeal of the Revenue was dismissed. The decisions were made based on legal interpretations, precedents, and the specific nature of the services involved. This detailed analysis of the judgment highlights the key issues raised, the arguments presented, and the Tribunal's decisions based on legal provisions and precedents.
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