2009 (7) TMI 514 - AT - Service Tax

Cenvat Credit- Rule 5, Notification No. 5/06-CE-(NT)- The respondent is a 100% EOU engaged in the manufacture of excisable goods. They filed refund claim in respect of accumulated and unutilized Cenvat Credit of Service Tax paid on commission disbursed for the sales activities of the finished goods. The claim was rejected by the Assistant Commissioner on the ground that in term of rule 5 of Cenvat Credit Rules, 2002 read with Notification No. 5/06-CE(NT), dated 14.03.2006, the credit of input services should be in respect of those services used for the manufacture of the final product. Inasmuch as the said service is for sale of final product, the benefit of the credit in terms of Rule 5 would not be admissible. Commissioner (Appeals) held that assessee entitled for credit. Held that- commissioner (Appeals) not examined the matter thus the matter remanded to the appellate authority.

Summary

Issues:
- Interpretation of rule 5 of Cenvat Credit Rules, 2002 and Notification No. 5/2006-CE
- Eligibility of refund for unutilized Cenvat credit on service tax paid on commission
- Commissioner (Appeals) decision based on different point than the issue involved

Interpretation of Rule 5 and Notification No. 5/2006-CE:
The case involved a 100% EOU filing refund claims for unutilized Cenvat Credit of Service Tax paid on commission for sales activities of finished goods. The Assistant Commissioner rejected the claim citing rule 5 of Cenvat Credit Rules, 2002, and Notification No. 5/06-CE(NT), stating that credit should be for services used in the manufacture of the final product. However, the Commissioner (Appeals) ruled in favor of the assessee, extending the place of removal to the Port area, allowing services connected with the business to be covered as input services. The revenue challenged this decision, arguing that the credit availed on sales activities did not fall under the notification, making it ineligible for refund.

Eligibility of Refund for Unutilized Cenvat Credit:
The revenue contended that the appellant's activity did not meet the criteria specified in the notification for refund eligibility. They argued that the credit on service tax paid for sales activities, not related to the manufacture of final products cleared for export under bond, did not qualify for refund under rule 5 of Cenvat Credit Rules, 2002. The Commissioner (Appeals) was criticized for not addressing the core issue of rule 5 and the notification's provisions, instead focusing on a different point related to transport services, which was deemed irrelevant to the case.

Commissioner (Appeals) Decision Based on Different Point:
The decision highlighted the discrepancy in the Commissioner (Appeals)'s approach, emphasizing the need for a thorough examination of the disputed issue concerning the interpretation of 'input services' and the claim of refund under rule 5. The Tribunal set aside the order and remanded the matter for a fresh decision, stressing the importance of considering the eligibility criteria for Cenvat credit refund in light of the specific provisions of rule 5 and the notification. The Larger Bench decision in the case of ABB Ltd. v. CCE&ST was referenced to emphasize the need for a consistent interpretation of Cenvat credit provisions.