2011 (12) TMI 120 - AT - Service Tax

Eligibility of availment of CENVAT credit of service tax paid on the services provided by the foreign person (Foreign Commission Agent) Held that - Board Circular F.No.345/1/2008-TRU dated 27.06.2008 clarifies that the recipient of the service is required to pay service tax under Section 66A though the service is not actually provided by the recipient but by the foreign person. Such taxable services, are not treated as output services however, service tax paid under Section 66A is available as input credit under CENVAT Credit Rules, 2004 provided the said services are used as input services by the manufacturer or producer of final products or a provider of output taxable service. - Decided in favor of assessee.

Summary

Issues:
- Eligibility of appellants for CENVAT credit of service tax paid to Foreign Commission Agents.

Analysis:
The case involved four appeals by M/s. Century Rayon against Orders-in-appeal No. SB/83-86/Th-II/09 dated 09.09.2009, all concerning the eligibility of the appellants for CENVAT credit of service tax paid to Foreign Commission Agents. The appellants availed CENVAT credit of Service Tax paid on various taxable services received from Foreign Commission Agents who did not have an office in India. The lower authorities confirmed duty demand on the appellants, stating that availing CENVAT credit of service tax paid by them on behalf of foreign persons on commission was not proper under the Central Excise Act, 1944. The appellants contended that they were entitled to claim the credit under Section 66A of the Finance Act read with Section 68(2) and Rule 2(1)(d)(iv) of the Service Tax Rules, as the service provided by the commission agent qualified as input service used in relation to the manufacture of goods.

The Advocate for the appellant argued that the impugned order misinterpreted the law and that the service rendered by the commission agent fell under the definition of sales promotion. It was also pointed out that services provided from outside India and received in India should not be treated as output services under Rule 5 of the Taxation of Services Rules. Reference was made to a Board Circular of June 2008, which supported the appellant's case, and a decision of the Punjab & Haryana High Court allowing CENVAT credit on services provided by Overseas Commission Agents. The Revenue, represented by the Appraiser, reiterated the findings of the Commissioner (Appeals).

Upon consideration, the Tribunal found that the issue revolved around the eligibility of the appellants for CENVAT credit of service tax paid to Foreign Commission Agents. The Commissioner (Appeals) had denied the credit based on a 2005 Board Circular, but a 2008 Circular clarified that service tax paid under Section 66A was available as input credit under CENVAT Credit Rules, provided the services were used as input services. The Tribunal held that the 2008 Circular prevailed over the 2005 Circular, especially in cases of manufacturers of excisable goods. Additionally, the decision of the Punjab & Haryana High Court supported the appellants' eligibility for CENVAT credit on services provided by Overseas Commission Agents. Consequently, the appeals were allowed, affirming the appellants' entitlement to the CENVAT credit on service tax paid to Foreign Commission Agents.