2016 (2) TMI 64 - AT - Central Excise

Entitlement to cenvat credit in respect of service tax paid to the commission agents based abroad - can the services rendered by the foreign based commission agent be stated to be input services within the meaning of such expression as defined under Rule 2(l) of the Cenvat Credit Rules, 2004? - Held that - We find that as per Notification 41/2007-ST dated 6.10.2007 as superseded by Notification 18/2009-ST dated 7.7.2009, the appellant has an option either to avail cenvat credit or to claim refund and the appellant has chosen to claim cenvat credit and this fact has been reflected in the records of the appellant also, but the respondent has never raised any objections all through. Earlier to the present audit, the department has conducted the audit on two occasions but the department never raised this issue. Further, with regard to limitation, we are of the considered opinion that the entire demand is barred by limitation as there is no material placed on record by the department to show that the appellant has suppressed the material facts with intent to evade duty. On the other hand, the appellant has placed on record two audit reports conducted by the department, wherein certain other objections were raised, but this issue was never raised which is sought to be raised now by the present show cause notice dated 27.4.2011 for the period from April 2006 to June 2009 by invoking the extended period of limitation. Further, the appellant has been disclosing the payment of commission to foreign based agent in all their shipping bills and also in their periodical returns submitted to the department. Therefore, keeping in view all the facts and circumstances and the definition of input services as well as Notification No.18/2009-ST we are of the considered opinion that the appellant is entitled to avail cenvat credit in respect of commission paid to the commission agent based abroad and the impugned order is liable to be set aside and we allow the appeal by setting aside the impugned order with consequential relief, if any. - Decided in favour of assessee

Summary

Issues:
Determining eligibility for cenvat credit on service tax paid to foreign commission agents. Assessing whether services rendered by foreign commission agents qualify as input services under Rule 2(l) of the Cenvat Credit Rules, 2004. Evaluating if the demand raised by the department is time-barred due to lack of suppression of material facts.

Analysis:

1. Eligibility for Cenvat Credit: The appellant, engaged in manufacturing nickel catalyst and other products, appointed commission agents abroad to procure orders from foreign buyers. The appellant claimed cenvat credit on service tax paid to these agents. The Commissioner (Appeals) upheld the demand raised by the department, disputing the eligibility of these services as input services. However, the appellant argued that the services of commission agents abroad qualify as input services under Rule 2(l) of the Cenvat Credit Rules, 2004. The Tribunal referred to precedents like CCE vs. Ambika Overseas and CCE vs. Jainson Industries, which supported the appellant's contention. The Tribunal held that the services provided by the foreign commission agents indeed fall under the definition of input services, allowing the appellant to avail cenvat credit.

2. Time Limitation for Demand: The department sought to recover cenvat credit allegedly wrongly availed by the appellant from April 2006 to June 2009. The appellant argued that the demand was time-barred as there was no suppression of material facts to evade duty. The Tribunal agreed, noting that the department failed to demonstrate any intent to evade duty by the appellant. The appellant had disclosed all transactions with the foreign commission agents in shipping bills and returns submitted to the department. Previous audits also did not raise any objections regarding the cenvat credit. Therefore, the Tribunal held that the demand was indeed barred by limitation.

3. Notification and Compliance: The appellant relied on Notification 41/2007-ST and subsequent amendments, which provided the option to claim either refund or cenvat credit. The appellant chose to avail cenvat credit, which was reflected in their records. Despite this, the department did not raise any objections until a later audit. The Tribunal emphasized that the appellant complied with the notification requirements and followed due process in claiming the cenvat credit. The department's delayed objection was deemed unjustified.

In conclusion, the Tribunal set aside the impugned order, allowing the appellant to avail cenvat credit on services provided by foreign commission agents. The demand raised by the department was deemed time-barred, and the appellant's compliance with notification provisions was upheld.