2017 (1) TMI 379 - AT - Service Tax

Commission paid to overseas agent - Whether the appellant can utilise the Cenvat credit so earned by them for discharge of Service Tax liability in respect of overseas commission agent? Held that - the Tribunal in the case of Shree Rajasthan Syntex Ltd. Vs. CCE 2011 (8) TMI 265 - CESTAT, NEW DELHI has held that such utilisation is in accordance with the law inasmuch as the Rule 2(r) of Cenvat Credit Rules conferred status of service provider to an assessee who paid the Service Tax as a recipient of service - Admittedly during the relevant period there was no change in the provisions of Rule 2(r) - the appellant is entitled to utilise the cenvat credit for discharge of service tax for the commission paid to the overseas agents - appeal allowed - decided in favor of appellant.

Summary

Issues:
Utilization of Cenvat credit for Service Tax liability on overseas commission agent.

Analysis:
The appellant, a manufacturer of acrylic fiber, availed Cenvat Credit for duty paid on inputs and service tax on input services. The issue was whether the appellant could use the Cenvat credit for Service Tax liability on commission paid to foreign agents. Lower authorities denied this, stating the appellant was not a taxable service provider. They cited Rule 3(4)(e) and the deletion of the Explanation in Rule 2(p) of CCR. The period in question was from 19.04.2006 to 30.09.2006.

Various Tribunal and High Court decisions allowed Cenvat credit for payment of service tax on GTA services. The Punjab & Haryana High Court and Himachal Pradesh High Court decisions supported this, although they were pre-19.04.2006. The deletion of the deeming provision in Rule 2(b) raised the question of denying Cenvat credit utilization to the assessee.

The Revenue relied on Tribunal decisions post-18.04.2006 stating Cenvat credit could not be used for received services. However, the Tribunal in other cases allowed Cenvat credit utilization for the period before 1.3.2008. The Division Bench decisions emphasized Rule 2(r) of Cenvat Credit Rules, defining the provider of taxable service, allowing the appellant to be deemed a service provider for utilizing Cenvat credit.

During the relevant period, Rule 2(r) remained unchanged. Following the Division Bench judgment, the appellant was deemed entitled to utilize Cenvat credit for the Service Tax on commission paid to overseas agents. Consequently, the impugned orders were set aside, and the appeals were allowed with consequential relief to the appellants.