Can appellant take credit of service tax paid on “Business Auxiliary Service” by their commission agents?

PJ/Case law/2013-14/1884

Case:-WADPACK PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, BANGALORE

Citation:-2013 (293) E.L.T. 400 (Tri.-Bang.)

Brief Facts:-In this appeal filed by the assessee, the short question is whether, for the period from April 2005 to June 2007, the appellant was entitled to avail CENVAT credit of the service tax paid on “Business Auxiliary Service” by their commission agents. The original and first appellate authorities held against them after holding that the service of the commission agent was for the activities of selling the goods of the assessee and not in relation to manufacture and clearance of the goods from the place of removal.

Appellant Contentions:-In the present appeal, the case of the assessee on merits is that, as “sales promotion” is a part of the very definition of “input service” under Rule 2(l) of the CENVAT Credit Rules, 2004, the benefit of the service tax on the commission paid by them to their sales agents cannot be denied on any ground whatsoever. In support of this case, the learned counsel for the appellant submits that the expression “clearance of final products upto the place of removal” occurring in the above definition is not relevant to “sales promotion”. It is submitted that the payment of commission by the assessee to their agents for sale of their finished goods was for promoting the sale and hence the activity is very much covered by the expression “sales promotion” found in the definition of “input service”. It is pointed out that these aspects were not examined by the learned Commissioner (Appeals). Even the plea of limitation was not properly addressed. The appellate authority did not pay heed to the plea that copies of the relevant returns, which were submitted along with the reply to the show-cause notice, clearly indicated the factum of CENVAT credit having not been availed on sales commission. Therefore, the learned counsel submits, the allegation of suppression of facts with intent to avail undue benefit of CENVAT credit is baseless and, therefore, the extended period of limitation is not invocable in this case. In this connection, the learned counsel has also challenged the penalty imposed on the assessee.

On the merits of the case, reliancehas been placed on Board’s Circular No. 943/4/2011-CX, dated 29-4-2011 (S. No. 5) wherein it was clarified that credit was admissible on the services of sale of dutiable goods on commission basis. Reliance is also placed on Order-in-Appeal No. 36/2012, dated 16-2-2012 passed by the Commissioner of Central Excise (Appeals-I), Bangalore in the same assessee’s case, wherein CENVAT credit on sales commission was allowed in view of the definition of “input service”, the Board’s Circular ibid and case law including Ambuja Cement Ltd. v. Union of India [2009 (14) S.T.R.. 3 (P&H) = 2009 (236) E.L.T. 431 (P&H)] and Commissioner v. ABB Ltd. [2011 (23) S.T.R. 97 (Kar.)]. The learned counsel has also relied on Commissioner v. Ambika Overseas [2012 (278) E.L.T. 524 (Tri.-Del.) = 2010 (20) S.T.R. 514 (Tribunal)]. She has also referred to Paragraphs 27 & 78 of the judgment in the case of Commissioner v. Ultratech Cement Ltd. [2010 (20) S.T.R.. 577 (Bom.) = 2010 (260) E.L.T. 369 (Bom.)].

Respondent Contentions:-The learned Superintendent (AR) has endeavored to justify the appellate Commissioner’s view but has not been able to cite any supporting decision.

Reasoning of Judgment:After giving careful consideration to the submissions, Tribunal found a formidable case for the appellant inasmuch as their claim is fully supported by the very definition of “input service” under Rule 2(l) of the CCR, 2004. “Sales promotion” expressly figure in the inclusion part of the definition. It is not even the Revenue’s case that the appellant was not paying commission for “sales promotion”. Where a particular activity is expressly mentioned in the inclusion part of the definition, one need not bother to examine whether it has satisfied the ingredients of the main part of the definition. This is the view expressed by the Hon’ble Bombay High Court in Ultratech Cement Ltd. case (supra). This view was acknowledged and accepted by the Board in the aforesaid Circular and the same was followed by the Commissioner (Appeals) in the assessee’s own case vide Order-in-Appeal No. 36/2012-C.E., dated 16-2-2012. Nobody has claimed before Tribunal that the said Order-in-Appeal was appealed against. Apparently, it was accepted by the department, being in keeping with the Board’s clarification and the definition of “input service”. The Tribunal’s decision in the case of Ambika Overseas (supra) is also to the same effect. No binding decision to the contra has been cited before the tribunal.
Accordingly, the impugned order is set aside and the appeal is allowed.

Decision:-The appeal is allowed.

Comment:-The gist of this case is that “sale promotion” figures in the inclusive part of the definition of “input service” under Rule 2(l) of the CCR, 2004 and so the cenvat credit of service tax paid on the commission paid to commission agents is admissible. However, the credit of service tax on commission paid to commission agents was denied by the High Court in the case of Cadila Healthcare Ltd.

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PJ/Case law/2013-14/1884

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