2008 (10) TMI 79 - AT - Service Tax

Refund of unutilized credit to 100% EOU on the service tax paid towards C&F charges and commission to Foreign Commission Agents as there was no denial of credit in SCN, lower authorities have travelled beyond the grounds while rejecting SCN refund claim rejected without providing opportunity by way of proceedings to deny credit - place of removal in case of FOB export is port so credit on C & F Agent services is admissible in respect of foreign commission agents also, refund is admissible

Summary

Issues:
1. Rejection of refund claim related to accumulated Cenvat credit.
2. Eligibility of Cenvat credit on service tax paid towards C&F charges and commission to Commission Agents located in foreign countries.

Issue 1: Rejection of Refund Claim:
The appellant, a 100% EOU without domestic tariff area clearances, engaged in the manufacture of beneficiated Bauxite for sale to foreign customers on FOB basis. The refund claim for accumulated Cenvat credit on service tax paid towards C&F charges and commission to foreign Commission Agents was rejected. The rejection was based on the grounds that these services were not covered under services related to the manufacture of final products and clearance of goods. The appellant contended that they were eligible for the credit as all services used in FOB exports, including C&F agent services and foreign agent's commission, were admissible. They argued that without these services, they could not sell goods or achieve clearance. The appellant also highlighted that Cenvat credit was permissible for services related to modernization, renovation, repair of factory premises, advertisements, market research, and sales promotion. The Tribunal noted that the lower authorities had exceeded their jurisdiction by rejecting the claim without issuing a show cause notice or including it as grounds for rejection. Relying on previous Tribunal decisions, the Tribunal allowed the appeal in favor of the appellant regarding C&F services.

Issue 2: Eligibility of Cenvat Credit on C&F Charges and Commission to Foreign Commission Agents:
The Tribunal analyzed the correspondence between the Revenue and the appellant regarding the refund claim. The appellant provided detailed explanations and documents supporting their claim for Cenvat credit. The Tribunal observed that the authorities had not initiated proceedings to disallow the credit taken by the appellant. It was noted that the place of removal in FOB exports should be considered as the port, making services related to such exports eligible for Cenvat credit. The Tribunal held that the lower authorities had erred in not providing the appellant with an opportunity to challenge the denial of Cenvat credit on services by foreign commission agents. Relying on precedents and the appellant's submissions, the Tribunal allowed the appeal in favor of the appellant for the refund of service tax paid on services provided by foreign commission agents.

In conclusion, the Tribunal set aside the lower authority's order and allowed the appeal in favor of the appellant for both C&F agent services and services provided by foreign commission agents. The judgment emphasized the importance of following due process and providing opportunities for parties to contest decisions affecting their rights.