2016 (9) TMI 99 - AT - Service Tax

CENVAT credit - asset management company - input services received from mutual fund agents and distributors Rule 2(l) of Cenvat Credit Rules, 2004 - Held that - the appellants are eligible for taking credit on the service tax paid by them on brokerage commission and the demand confirmed by the adjudicating authority is liable to be set aside. This issue has been already decided in case 2016 (1) TMI 23 - CESTAT CHENNAI appeal allowed decided in favor of appellant.

Summary

Issues involved: Whether services received from mutual fund agents/distributors qualify as input services under Cenvat Credit Rules, 2004 for an Asset Management Company and if the company is obligated to pay commission to these agents/distributors as per IRDA regulations.

Analysis:

Issue 1: The primary issue in this case revolves around determining whether the services provided by mutual fund agents/distributors can be classified as input services under the Cenvat Credit Rules, 2004 for the Asset Management Company. The Revenue authorities contended that such services do not fall under the category of input services, leading to a demand for reversal of CENVAT credit and additional tax on output services. The adjudicating authority upheld this view, resulting in penalties being imposed on the company.

Analysis: The adjudicating authority concluded that the services rendered by mutual fund agents/distributors were not directed towards the appellant but rather the Mutual Fund itself. However, the Tribunal referred to a previous decision involving Sundaram Asset Management Company Ltd., where it was established that commission paid for brokerage could indeed be eligible for CENVAT credit. The Tribunal cited various High Court decisions and the SEBI (Mutual Fund) Regulations Act, 1996 to support this stance.

Issue 2: Another aspect of the case involved the validity of the documents on which the credit was availed. The Revenue authorities argued that the documents did not meet the criteria for availing credit under the Cenvat Credit Rules, 2004.

Analysis: The Tribunal referenced a clarification issued by the Revenue to the appellant, affirming their eligibility for CENVAT credit on service tax paid for brokerage charges. Additionally, the Tribunal highlighted precedents set by the Hon'ble Madras High Court and the Bombay High Court, emphasizing that the absence of specified documents should not impede the rightful availing of credit if the duty payment is undisputed and genuine documents are provided.

Conclusion: Ultimately, the Tribunal ruled in favor of the appellant, allowing them to avail credit on the service tax paid for brokerage commission. By aligning with previous judicial decisions and clarifications, the Tribunal set aside the demand confirmed by the adjudicating authority, thereby resolving the issue in favor of the appellant. The judgment serves as a significant precedent for similar cases involving the eligibility of CENVAT credit on specific services within the financial sector.