Whether Cenvat credit can be utilised for discharge of service tax liability in respect of overseas commission paid?

PJ/Case Laws/2012-13/1324

Case:- INDIAN ACRYLIC LTD. Vs COMMISSIONER OF C. EXCISE, CHANDIGARH

Citation:- 2012(28) S.T.R. 354 (Tri. – Del.)

Brief Facts:-The appellant is a manufacturer of acrylic fibre, acrylic top etc. Appellant has availing the facility of Cenvat credit of duty paid on inputs, capital goods and service tax paid on inputs services used in or in relation to manufacture of final products. Appellants are availing the services of foreign agents and were paying commission on said agents located outside India. They were discharging the service tax liability in respect of such commission paid to the foreign agents in terms of provisions of Rule 2(1)(d)(iv) and (v). The lower authorities have denied the utilisation of Cenvat credit availed by the appellant on the capital goods, for the purpose of discharging their Service Tax liability on the ground that the appellant can not be treated as provider of taxable Service. Appellant filed appeal before tribunal for utilising Cenvat credit for discharge of Service Tax for commission paid to the overseas agents.

Appellant Contentions:- The appellantplaced reliance on the various decisions of the Tribunal as also of various High Courts laying down that Cenvat Credit earned on various input capital goods or input services can be utilised for payment of service tax on GTA services. It was also submitted that GTA services enjoy the same status as the commission agent to overseas agents inasmuch as in both the cases, it is recipient of services which is required to discharge the service tax liability.

They have relied on the decision given in the following cases:

§ CCC, Chandigarh v. Nahar Industrial Enterprises Ltd.
§ CCE V. Auro Spinning Mills & Ors.
§ Shree Rajasthan Syntex Ltd. vs CCE

Respondent Contentions:-Respondent submits that the appellant has not provided services and appellant was not service provider. Respondent contented that after the deletion of Explanation appearing in Rule 2(p) of Cenvat Credit Rules, which conferred status of output service provider to an appellant, the appellant cannot be held to be a provider of output services. Inasmuch as the said deletion took place on 18-4-2006, the appellants are not entitled to utilise the credit. Respondent has relied on following decisions of the Tribunal:

§ Iswari Spinning Mins v. Commissioner
§ Gimatex industries Pvt. Ltd. v, CCE Nagpur

Above decisions have held that after 18-04-2006, Cenvat credit cannot be utilised for payment of Service Tax on services received.

Reasoning of Judgment:-Tribunal has considered submissions on both sides. Tribunal relied on decisions cited by the appellant and specifically emphasized on the decision given in the case of Shree Rajasthan Syntex Ltd. vs CCE, that has held that such utilisation is in accordance with the law inasmuch as the Rule 2(r) of the Cenvat Credit Rules conferred status of service provider to an assessee who paid the service tax as a recipient of service.

The other decisions have clarified that the Cenvat credit earned on various input capital goods or input services can be utilised for payment of Service Tax on GTA services. Tribunal holds that the appellant is entitled to utilise the Cenvat credit for discharge of Service Tax for the commission paid to the overseas agents. Accordingly, the impugned orders are set aside and appeal is allowed with consequential relief to the appellants.

Decision:- Appeal Allowed.

Comment:-The analogy drawn from this case is that cenvat credit can be utilised for discharging service tax liability as a service recipient.

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PJ/Case Laws/2012-13/1324

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