2008 (12) TMI 134 - AT - Service Tax

BAS - whether the Respondent availing the services of commission agents, are eligible for taking credit of the service tax paid by the commission agents on the commission received by them - definition of input service as given in Rule 2(1) of CCR, 2004, covers, in addition to the services used by a manufacturer whether directly or indirectly in or in relation to manufacture, other service also, including the services used in relation to advertisement or sales promotion - services provided by the commission agents have to be treated as input services - credit of service paid on the commission received by the commission agents allowed

Summary

Issues:
1. Eligibility for Cenvat credit on service tax paid by commission agents.
2. Interpretation of the definition of 'input service' under Cenvat Credit Rules, 2004.
3. Disallowance of Cenvat credit on outward freight.

Analysis:

Issue 1: Eligibility for Cenvat credit on service tax paid by commission agents
The case revolved around whether the Respondent, availing the services of commission agents, could claim credit for the service tax paid by the commission agents on the commission received by them. The Deputy Commissioner disallowed a portion of the credit, leading to a penalty imposition. The Commissioner (Appeals) upheld the disallowance of credit on outward freight but allowed the credit on the commission. The Revenue appealed against this decision.

Issue 2: Interpretation of the definition of 'input service'
The Departmental Representative argued that post-removal activities were not covered under the definition of 'input service.' On the contrary, the Respondent's Counsel contended that services provided by commission agents, akin to sales promotion, fell under the inclusive part of the definition. They cited relevant Tribunal judgments supporting their stance.

Issue 3: Disallowance of Cenvat credit on outward freight
The Commissioner (Appeals) confirmed the disallowance of credit on outward freight but set aside the disallowance concerning the service tax on the commission received by commission agents. The Tribunal, after considering both parties' submissions, concluded that the commission agents' services constituted sales promotion, falling within the definition of 'input service.' The Tribunal referenced prior judgments supporting this interpretation, ultimately dismissing the Revenue's appeal.

In conclusion, the Tribunal upheld the Commissioner (Appeals)'s decision, allowing the Cenvat credit for the service tax paid on the commission received by the commission agents. The judgment emphasized that such services qualified as 'input services' under the Cenvat Credit Rules, 2004, aligning with the inclusive part of the definition covering sales promotion activities. The case highlighted the importance of a broad interpretation of 'input service' to encompass various activities contributing to the manufacturing process.