2009 (2) TMI 150 - AT - Service Tax

Cenvat Credit on Input Services - prima facie view - the appellants have a strong case on merits. Sales promotion has specifically been included in the definition of input service . Stay Granted

Summary

Issues Involved:
1. Whether the appellants are entitled to credit for Service Tax paid on "Business Auxiliary Services" under the category of "input service" as per Rule 2(1) of Cenvat Credit Rules, 2004.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Bangalore involved a dispute regarding the eligibility of the appellants to claim credit for Service Tax paid on "Business Auxiliary Services" under the category of "input service." The appellants, manufacturers of iron ductile pipes, provided commission to their agents for booking orders and selling final products. The agents discharged Service Tax liability on the commission under "Business Auxiliary Services," which the appellants considered as input credit. However, the revenue contended that these services did not qualify as 'input service' under Rule 2(1) of Cenvat Credit Rules, 2004. The Adjudicating Authority confirmed the demand, imposing penalties and interest.

The learned Advocate representing the appellants highlighted the definition of 'input service' under Rule 2(1), emphasizing that 'sales promotion' was specifically included in the definition, justifying the appellants' entitlement to credit. Conversely, the departmental representative argued that only services directly related to the manufacture of final products would qualify for credit, implying that services like sales promotion post-manufacture did not qualify. After a thorough consideration, the Tribunal found that the appellants had a strong case on merits. Noting that 'sales promotion' was explicitly mentioned in the definition of 'input service,' the Tribunal decided to waive the pre-deposit of all demanded amounts until the appeal's final disposal. They ordered no coercive measures to be taken during the appeal process, citing the Supreme Court's decision in Kumar Cotton Mills, allowing the order's validity beyond 180 days. The appeal was scheduled for final hearing on 28th April 2009.

In conclusion, the judgment favored the appellants, recognizing the inclusion of 'sales promotion' in the definition of 'input service.' The Tribunal's decision to waive the pre-deposit and prevent coercive actions until the appeal's resolution provided relief to the appellants, allowing them to continue their case without immediate financial burden.