Admissibility of credit of service tax paid on services rendered by commission agent.

PJ/Case law/2013-14/1879

Case:- VISHAL PIPES LTD. Vs COMMISSIONER OF CENTRAL EXCISE, NOIDA

Citation:- 2013 (293) E. L. T. 386 (Tri – Del.)

Brief facts:- The Appellants are manufacturers of steel tubes and pipes, structural pipes and rigid PVC pipes and they had been taking Cenvat credit of input services used by them for sale of such product. That is to say, they were engaging commission agents for promoting their sale and commission was being paid to commission agents on which service tax had been paid. They were taking credit of such service tax paid on services rendered by commission agent. Revenue made out a case that services of commission agent is not an input service within the meaning of the expression as defined under Section 2(l) of Cenvat Credit Rules, 2004. Based on such reasoning, Revenue issued two Show Cause Notices for the period March 2010 to Sept. 2010 and October 2010 to March 2011 and later confirmed duty demand of Rs. 1,83,949/- and Rs. 2,21,570/- respectively for the said periods by disallowing such Cenvat credit.

Appellant’s Contentions:- The authorized representative of the company pointed out that the said issue was already decided by the Tribunal in their favour vide Final Order No. 292/2012-SM(BR) in Appeal No. E/2243/2011-SM in their own case and therefore the appeal may be heard without pre-deposit of dues and the same may be allowed following the precedent decision.

Respondent’s Contentions:- The respondent reiterated the findings of the lower adjudicating authority.

Reasoning of judgment:- The Hon’ble judge noticed that services used for “sales promotion” is specifically included in the definition of input services as defined under Rule 2(l) of Cenvat Credit Rules, 2004. Therefore, there was no merit in the case made out by Revenue. Therefore after waiving the requirement of pre-deposit of dues for admission of appeal, the appeal itself was taken up for disposal and the same was allowed following the precedent decision in favour of the appellant in their own case.

Decision:- Appeal allowed.

Comment:- The issue regarding admissibility of credit on service tax paid to commission agents is a matter of constant litigation since the High Court has disallowed credit in the case of Cadila Healthcare. However, since the services are used for “sales promotion” that is specifically included in the definition of input services as defined under Rule 2(l) of Cenvat Credit Rules, 2004, credit is allowed in many cases.

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PJ/Case law/2013-14/1879

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