2016 (4) TMI 777 - AT - Service Tax

Eligibility of Cenvat credit - on payment of service tax - rendered by their Foreign Agent - Held that - once what was received by the respondent being output services, the same would automatically become input service in the hands of the respondent (the service receiver) in terms of Rule 2 (l) of Cenvat Credit Rules. There can be no second thought that the service of foreign clearing & forwarding agent was an integral part of the respondent s business. It can hardly be said that the activity carried out by the Foreign C&F Agent is not an activity relating to business . The word business by itself is all embrasive to refer to activity and the definition given in the input service is activities relating to business . The findings of the Commissioner (Appeals) that the clearing & forwarding service received is vital for business activity cannot, therefore, be faulted with. It is strange that the department had accepted the payment of tax under reverse charge but objected to the availment and future utilization of credit for discharge of future liability by the Respondent. This stand adopted by the department does not seem to be an approach in the right direction. The further finding given by the Commissioner (Appeals) with regard to non-invocation of extended period holding that the issue is purely interpretative in law cannot also be faulted with. The submission made by the Advocate for the Respondent that there is no finding with regard to the penalty or invocation of extended period is also factually true. - Decided against the revenue

Summary

Issues:
Eligibility of cenvat credit on payment of service tax for Clearing & Forwarding Services received from abroad.

Analysis:
1. The Respondent, engaged in manufacturing rubber products, availed cenvat credit of service tax paid for C&F Services. A show cause notice was issued demanding credit repayment, interest, and penalty. The Order in Original disallowed credit and imposed a penalty. The Commissioner (Appeals) allowed the appeal, citing all business activities as inputs services crucial for business, and no misuse of services.

2. The department appealed, arguing the Respondent, as a manufacturer, is ineligible for credit on post-manufacturing activities. They contended the term "input service" should be narrowly interpreted, restricting claims beyond manufacturing. Both parties presented their arguments, with the Respondent emphasizing legal precedents supporting their position.

3. The Tribunal noted the foreign C&F agent's service was integral to the Respondent's business, making it an input service. The Commissioner (Appeals) correctly interpreted the term "business" as encompassing all related activities, citing relevant case law. The department's acceptance of tax payment under reverse charge but objection to credit utilization was deemed inconsistent.

4. Ultimately, the Tribunal dismissed the department's appeal, citing lack of merit. The decision was based on the integral nature of the foreign C&F agent's service to the Respondent's business and the Commissioner (Appeals)'s correct interpretation of the term "business." The department's inconsistent stance on tax payment and credit utilization further weakened their case.

This detailed analysis covers the eligibility of cenvat credit on service tax payment for C&F Services, addressing legal interpretations, precedents, and the Tribunal's final decision in favor of the Respondent.