2017 (4) TMI 750 - AT - Service Tax

Cenvat credit - Commission paid to their overseas agent under reverse charge mechanism - N.No. 30/2004-C.E., dated 9-7-2004 - Penalty - Held that - On export of goods no duty is payable by the assessee although the goods manufactured by the appellant is dutiable, therefore, merely, claiming benefit of Notification No. 30/2004 ibid, the appellant cannot be denied the Cenvat credit on input/input services. The appellant cannot be put on adverse position by way of Notification No. 30/2004 - Decided in favor of the assessee.

Summary

Issues:
- Denial of Cenvat credit on input service under reverse charge mechanism
- Applicability of Notification No. 30/2004-C.E. on the appellant's case
- Entitlement of exporter to avail Cenvat credit on input/input services for final exported goods

Analysis:
The appellant appealed against the order denying Cenvat credit on input service used in the manufacture of Cotton yarn, Polyester yarn, and Blended yarn. The dispute arose when a show cause notice was issued, contending that the service tax paid on commission to overseas agents did not qualify for Cenvat credit due to the exemption under Notification No. 30/2004-C.E. The appellant, being a 100% Export Oriented Unit (EOU), argued that the notification was not applicable as the goods were exported, making them eligible for Cenvat credit on inputs used in the manufacture of final exported goods.

The appellant's counsel relied on a precedent, Lavino Kapur Cottons Pvt. Ltd., to support the claim that as an exporter, they were entitled to the Cenvat credit under the circumstances described. Conversely, the respondent's representative contended that the appellant was benefiting from Notification No. 30/2004, which exempted them from paying duty on the final product, thus disqualifying them from taking Cenvat credit on input services.

After hearing both parties, the Tribunal acknowledged that the appellant, as an exporter, was not liable to pay duty on the goods exported despite the goods being dutiable. Therefore, the Tribunal concluded that the appellant's eligibility for Cenvat credit on input services should not be negated solely based on the notification. The Tribunal held that the appellant correctly availed the Cenvat credit on input services utilized for exporting goods, overturning the impugned order and allowing the appeal with any consequential relief deemed necessary.