Credit of service tax on the overseas commission is available ?

PJ/Case Laws/2010-11/1015

Case: Commissioner of C. Ex., Jalandhar v/s Ambika Forgings

Citation: 2010 (20) STR 662 (Tri.–Del)

Issue:- Whether credit of service tax on the overseas commission is available as credit?

Brief Facts:- The assessee was availing credit of service tax levied on overseas commission paid by them. Revenue proceeded against the respondent on the ground that the said service was not an input service. The Commissioner (A) held that the overseas commission is an input service and allowed Cenvat credit.

Appellant’s Contentions:- Revenue contended that the overseas commission paid by the respondent was not an input service and was having no connection with manufacture or selling activities. Revenue relied upon the meaning of promotion according to Webster’s Dictionary. Revenue conceives that the meaning of the term “promotion” if not defined by law, meaning thereof shall be the meaning as has been given by the grounds of appeal of revenue. Revenue submitted that the overseas service does not relate to manufacture and also that relates to the place beyond place of removal.

Reasoning of Judgment:- The Tribunal held that where the legislative meaning of a term used in law, it is unsafe to adopt dictionary meaning. In common business or commercial parlance business promotion adds to earning of revenue for a seller or a manufacturer. Whether addition to revenue earning by a manufacturer is made by manufacture of extra quantity goods has earned excise duty is also relevant. If business promotion activity adds to revenue by manufacture and sale of incremental quantity, the business promotion activity may have nexus to such sales. Accordingly, service tax paid on such service may be attributable to input service tax. Claim of Cenvat credit is made to avoid cascading effect under Rule 2 (1) (ii) of the Cenvat Credit Rules, 2004. Once Legislative mandate is apparent, then no technical meaning need to be assigned to deny relief to the Respondent-assessee.

In the absence of the Revenue’s finding that the business promotion has not resulted with any promotion of business activities there would have been a case for Revenue. But, that is not the case. When the order suffers from such an infirmity there is nothing to impeach the order of the Commissioner (A). In terms of the word” includes” in Rule 2 (1) (ii) of the Cenvat Credit Rules, 2004, broad activities which are having nexus to business and integrally connected are brought to the fold of input services. Therefore a pedantic view cannot be taken.

Judgment:- Appeal dismissed.

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PJ/Case Laws/2010-11/1015

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