2014 (6) TMI 586 - AT - Central Excise

Availment of input service credit paid on commission - Trading services - extended period of limitation - Held that - appellant availed input service credit on commission for procurement of orders. On perusal of the impugned order, it is seen that the input service credit in respect of manufacturing activity, service tax on commission was allowed. Credit was denied in respect of that portion of service tax relating to the commission paid on the trading goods. The definition of input service under Rule 2(l) of the CENVAT Credit Rules means any service used by a manufacturer whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products. In the present case, there is no dispute that the appellant availed credit on commission in respect of trading goods, which are not in or in relation to the manufacture of final products and therefore there are not eligible to avail credit on the commission paid on trading goods. - credit was rightly denied - Decided against the assesssee. Appellant had not disclosed the availment of input service credit on commission in respect of trading activities. These facts came to the knowledge of the Department only on verification of the documents such as contract agreements, commission agreements etc. So there is no merit in the submission of the learned counsel on limitation - Decided against assessee.

Summary

Issues:
- Denial of input service credit on commission paid for trading activities
- Interpretation of 'input service' under Rule 2(l) of the CENVAT Credit Rules
- Applicability of case laws supporting eligibility of CENVAT credit for business activities
- Allegation of suppression of facts by the appellant regarding trading activities
- Barred by limitation defense for the demand of tax

Analysis:

1. The case revolves around the denial of input service credit amounting to Rs.17,21,791/- on the commission paid for trading activities by the appellants. The show-cause notice proposed the denial of credit, along with interest and penalty, which was confirmed by the adjudicating authority and upheld by the Commissioner (Appeals).

2. The appellant argued that the definition of 'input service' under Rule 2(l) of the CENVAT Credit Rules includes activities related to the business, citing precedents like the Hon'ble Bombay High Court's decision in CCE Vs. Ultra Tech Cement. They contended that the demand of duty is time-barred and highlighted the amendment in the definition of input service in 2011 exempting trading as a service.

3. On the other hand, the Revenue argued that the Tribunal consistently held that credit is not eligible for trading services, referring to various decisions. They accused the appellant of suppressing facts regarding their trading activities, leading to the wrongful availing of credit.

4. The judgment analyzed the definition of 'input service' under Rule 2(l) of the CENVAT Credit Rules, emphasizing that the credit should be related to the manufacture of final products. It was noted that the credit on commission paid for trading goods was rightly denied as it was not linked to the manufacture of final products.

5. The appellant's claim of not availing CENVAT credit for trading-related services was dismissed as it was evident that credit was indeed taken on the commission paid for trading goods. The judgment aligned with the case law precedent that activities not integral to the business of manufacturing final products do not qualify as input services.

6. Regarding the limitation defense, it was ruled that the appellant's non-disclosure of availed credit on commission for trading activities until discovered by the Department invalidated the limitation argument. Ultimately, the order of the Commissioner (Appeals) was upheld, and the appellant's appeal was rejected, with the miscellaneous application for stay extension being dismissed as well.