CENVAT Credit on Service Tax Credit paid by Automotive Dealers Allowable: CESTAT [Read Order]

The Mumbai Bench of Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) has held that the Central Value Added Tax (CENVAT)credit on services tax credit paid by automotive dealers would be allowable.  

The appellant ICICI Lombard General Insurance Company Ltd. is a general insurance company, engaged in the business of providing insurance services in respect of automobiles. As per industry practice, automotive dealers, being the first point of contact with the buyers of the automotive car/vehicle, interact with the buyer and facilitate the availment of insurance services of the appellant by the buyer. 

Based on the same, the buyer procures the insurance policies for the cars/vehicle from the appellant. Out of the premium collected from the buyer of the motor car/vehicle, a portion thereof is paid by the appellant to the automotive dealer as a commission, on which amount, the automotive dealer also charged service tax and duly discharged such liabilities on making payment into the Central Government Account.

On the basis of the invoices issued by the automotive dealer and the service tax paid by the automotive dealer to the government, the appellant had availed Cenvat credit, which had been sought to be denied and recovered along with interest and penalty.

V. S. Nankani, appeared on behalf of the assessee and Nitin M. Tagade appeared on behalf of the respondent.

The Division Bench of S.K. Mohanty, (Judicial Member) and C.J. Mathew, (Technical Member) set aside the impugned order observing that theOriginal Authority had held that no commission could have been paid by the appellant to the automotive dealer under Section 40 of the Insurance Act, 1938 and that such payment, which was recorded by the automotive dealers in their books of account as a commission, was illegal.

Such findings were untenable on the question of the eligibility to avail Cen vat credit, when tax had undisputedly been received by the Government from the automotive dealers, the Bench further observed.

To Read the full text of the Order CLICK HERE

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