2017 (5) TMI 45 - AT - Central Excise

CENVAT credit - services received from overseas agents - reverse charge mechanism - denial on the ground that the services received from outside overseas agents cannot be treated as output service for utilising the Cenvat credit account for discharging their service tax liability arising therefrom - Held that - the subject matter is covered by the CESTAT decision in the case of Kansara Modler Ltd. Vs. CCE, Jaipur-II 2014 (1) TMI 1095 - CESTAT NEW DELHI , where it was held that Once appellant is person liable to service tax, he becomes provider of taxable service - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against denial of utilizing Cenvat account for payment of service tax on services received from overseas agents.

Analysis:
The appellant, an exporter, engaged overseas agents to procure export orders and paid commission to them. The services received from these overseas agents were subject to service tax under the reverse charge mechanism. The appellant utilized Cenvat credit to pay the service tax. However, the department denied this facility, arguing that services from overseas agents cannot be considered output services for utilizing the Cenvat credit account. The appellant relied on a CESTAT decision in the case of Kansara Modler Ltd. Vs. CCE, Jaipur-II, where it was held that the appellant, being a person liable for service tax, can be considered an output service provider under the Cenvat Credit Rules. This decision emphasized the interpretation of Rule 2(q) of Cenvat Credit Rules in conjunction with Rule 2(1)(d)(iv) of Service Tax Rules, establishing the appellant as an output service provider eligible to utilize Cenvat credit for service tax payment. The CESTAT's ruling in the Kansara Modler case was pivotal in setting aside the department's denial and allowing the appeals.

Conclusion:
Based on the CESTAT's decision in the Kansara Modler case, the denial of utilizing Cenvat account for paying service tax on services received from overseas agents was overturned. The appellant's status as a person liable for service tax qualified them as an output service provider under the relevant rules, enabling them to utilize Cenvat credit for service tax payment. The impugned orders were set aside, and the appeals were allowed, emphasizing the correct interpretation of the rules governing service tax liability and Cenvat credit utilization in cases involving services received from overseas agents under the reverse charge mechanism.