2009 (12) TMI 76 - AT - Service Tax

Documents for availing credit contention of appellant is that for valuation purpose, payment by debit note included and hence credit admissible - while the authorities below have examined the case with reference to admissibility of debit notes as valid documents, there does not appear to have been any examination done as to whether the impugned services in respect of which credit is being sought can be considered as input service. - Prima facie, it appears that the consignment agents services and the selling agents services are not in the nature of input services which are used in or in relation to the manufacture of excisable goods. Hence, the definition of input service under the CENVAT Credit Rules which includes activities relating to business cannot be interpreted to include an activity which is a post- manufacturing activity. - The learned counsel has raised a pertinent question that in these cases the appellants were only put on notice regarding the eligibility of debit note as a valid document for taking credit and not on the question of the impugned taxable service being ineligible input service. - Keeping in view the foregoing, I set aside impugned orders. The cases are remanded to the original authority for examining the matter afresh and for passing fresh orders.

Summary

Issues:
- Disallowance of service tax credit based on ineligible documents
- Admissibility of debit notes as valid documents for availing service tax credit
- Whether consignment agents' and selling agents' services qualify as input services under CENVAT Credit Rules

Issue 1: Disallowance of service tax credit based on ineligible documents:
The appellants, engaged in manufacturing caustic soda and chloromethane, were denied service tax credit for impugned services due to availing credit based on ineligible debit notes issued by service providers. The learned counsel argued that as per Section 67 of the Finance Act, 1994, the gross amount charged includes payment by debit notes, making the credit of tax valid. Referring to a Tribunal decision, it was highlighted that debit notes containing necessary details must be considered for service tax credit. The matter was remanded for verification of document details to allow the credit.

Issue 2: Admissibility of debit notes as valid documents for availing service tax credit:
The Tribunal examined whether the impugned services for which credit was sought could be considered as input services under CENVAT Credit Rules. It was noted that the authorities had focused on the admissibility of debit notes but failed to assess if the services qualified as input services. Reference was made to the power of the Central Government to make rules for credit of service tax paid on services used in manufacturing excisable goods. Prima facie, consignment and selling agents' services were deemed post-manufacturing activities, not qualifying as input services, as per the rules.

Issue 3: Whether consignment agents' and selling agents' services qualify as input services under CENVAT Credit Rules:
The Tribunal emphasized that activities post-manufacturing cannot be considered input services under the CENVAT Credit Rules, which include "activities relating to business." Citing precedents, it was established that rules must align with statutory powers granted, and the definition of input services cannot extend to services used after manufacturing. The cases were remanded for a fresh examination to determine if the impugned services qualified as eligible input services, providing the appellants with an opportunity for a fair hearing on this aspect.

In conclusion, the Tribunal set aside the impugned orders, remanding the cases to the original authority for a comprehensive reevaluation. The original authority was instructed to assess the validity of debit notes and determine if the impugned services qualified as eligible input services under the CENVAT Credit Rules. The appellants were to be given a fair opportunity for hearing on this crucial issue before fresh orders were passed. All three appeals were allowed by way of remand for further examination and decision.