Whether credit of service tax on bank commission charges for collection of sale proceeds of goods allowable?

PJ/Case Laws/2012-13/1431

Case:- COMMISSIONER OF CENTRAL EXCISE, SURAT-II V/S VISHAL MALLEABLES LTD.

Citation:- 2013(287) E.L.T. 234 (Tri. - Ahmd.)

Brief Facts: -The present appeal has been filed by the Revenue. During the period April 2008 to February 2009, the respondent herein was charged by the bank for bank commission charges and charged Service Tax from the respondent. The respondent took the CENVAT credit of the bank commission charges for collection of sale proceeds of their goods. Show Cause Notice was issued for denial of such CENVAT credit which was adjudicated after following the due process of law. The adjudicating authority confirmed the demand along with interest and also imposed equal amount of penalty. Aggrieved by such an order, the respondent preferred an appeal, and first appellate authority following the law laid down by the various decisions of the Tribunal and also relying upon Notification No. 19/2009-S.T. allowed the appeal on the ground that such bank services are in relation with the business activity and would fall under the definition of input services as given in 2(l)(ii) of CENVAT Credit Rules, 2004.

Appellant’s Contention: - The appellant submits that the findings of first appellate authority are incorrect as bank commission charges for the bank service rendered by the bank to the appellant was in respect of sale proceeds of the finished goods. It is his submission that the sale proceeds of the finished goods can take only after the clearance of the goods manufactured in the premises of the appellant and hence it is rendered beyond the place of removal.

Respondent’s Contention: - The respondents contended that the issue is no more res integra and has been decided by the decision of the Tribunal in the case of Jeans Knit Pvt. Ltd. - 2011 (21) S.T.R. 460 (Tri.-Bang.) and in the case of JSW Steel Ltd. - 2012 (281) E.L.T. 582 (Tri.-Mumbai).

Reasoning of Judgment: - The Hon’ble Tribunal held that it is not in dispute that the amount of Service Tax charged by the bank towards bank commission charges is not for the collection of sale proceeds of the export goods. This would indicate that such charges were in relation to the business of manufacture and sale of the appellant. It can be seen from the reproduction of the findings of the first appellate authority that they have taken a view, which is in consonance with the law and it is undisputed that the said bank commission charges are in respect of business of the appellant. The co-ordinate Bench of the Tribunal in the case of Jeans Knit Pvt. Ltd. (supra), had considered this issue in detail for the purpose of refund of such amount on the goods which are exported. The ratio laid down by the decision in the case of Jeans KnitPvt. Ltd., is the ratio followed by the first appellate authority in coming to conclusion that if the goods are exported, refund of Service Tax on the services which are used in relation to the goods exported, needs to be refunded. They also find that the said decision was followed by the co-ordinate bench of the Tribunal in the case of JSW Steel Ltd. (supra) wherein various other decisions were also followed and case was decided in favour of the assessee. Therefore, the issue is no more res integra and the impugned order is correct, legal and does not suffer from any infirmity.

Decision: - The department appeal was rejected.

Comment:-The essence of this case is that bank services availed for the sale of goods are more or less in relation to the business activity and would thereby fall under the input service definition for admissibility of credit.

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PJ/Case Laws/2012-13/1431

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