2015 (2) TMI 755 - AT - Service Tax

Payment of service tax by utilising Cenvat credit- Commission paid to the foreign commission agent- Held that - I find that to determine eligibility to pay duty from the CENVAT Credit account, the Rules namely Rule 2(r), (2)(p) and 2(q) of Cenvat Credit Rules, 2004 need to be considered read with Rule 2(1)(d)(iv) of the Service Tax Rules, 1994. Rule 2(1)(d)(iv) states that in relation to any taxable service provided from any country other than India and received by any person in India under Section 66A of the Act, the recipient of the service is liable to pay service tax. Rule 2 (p) states that the output service is a taxable service provided by the provider of taxable service. The provider of taxable service is defined under Rule 2(r) to include a person who is liable to pay service tax. The person liable for paying service tax has the meaning assigned to defined in Rule 2(1)(d) of the Service Tax Rules. In the present case the person liable to pay tax is the recipient. A harmonious reading of the above provisions of law indicate that the recipient of the service in this case is a provider and therefore the plea of the Revenue that the appellant is not a output service provider is not correct. The same views were taken in the case of Tata AIG Life Insureance Co. Ltd. 2014 (4) TMI 637 - CESTAT MUMBAI and Kansara Modler Ltd. 2014 (1) TMI 1095 - CESTAT NEW DELHI . Decided in favour of appellant.

Summary

Issues:
Appeal against Order-in-Appeal confirming service tax demand, Utilization of CENVAT Credit for payment of service tax, Interpretation of Cenvat Credit Rules, 2004, Eligibility to pay duty from CENVAT Credit account.

Analysis:
The judgment pertains to an appeal challenging an Order-in-Appeal that upheld a service tax demand along with penalties. The appellant, a manufacturer of fabrics and yarn, utilized CENVAT Credit to pay service tax under "Business Auxiliary Services" for commission paid to a foreign agent. The issue revolved around the legality of using CENVAT Credit for such payments. The appellant argued that prior to July 2012, such utilization was permissible, citing relevant case laws. The Revenue contended that the statute does not allow credit utilization in this scenario as the appellant is not an output service provider.

Upon considering the Cenvat Credit Rules, 2004 and Service Tax Rules, 1994, the judge analyzed the eligibility criteria for paying duty from the CENVAT Credit account. It was highlighted that the recipient of the service is liable to pay service tax for taxable services received from a foreign country. The judge emphasized that the recipient of the service is deemed a provider of taxable service, contrary to the Revenue's argument. Referring to precedents like Tata AIG Life Insurance Co. Ltd. and Kansara Modler Ltd., the judge concluded that the appellant, as the recipient, is indeed a provider of service, thereby allowing the appeal and granting consequential relief.

In conclusion, the judgment clarifies the interpretation of Cenvat Credit Rules, 2004 in the context of utilizing credits for service tax payments. It establishes that the recipient of services can be considered a provider of service, contrary to the Revenue's stance. The decision is based on a harmonious reading of relevant provisions and supported by precedent cases, ultimately allowing the appeal and providing relief to the appellant.