Credit of service tax paid for selling/marketing of finished goods is available if covered by sales promotion.

PJ/CASE LAW/2015-16/2567

Case:-C.C.E. & S.T., SURAT-IIVsSHREE KAMREJ VIBHAG KHAND UDYOG SAHAKARI MANDLI LTD.

Citation:-2014 (36) S.T.R. 814 (Tri. - Ahmd.)

Brief Facts:-This appeal is filed by the Revenue against OIA No. BC/64/ SURAT-II/2011, dated 12-4-2011.The Revenue is aggrieved by the impugned order on the ground that the first appellate authority has allowed the Cenvat credit of the Service Tax paid on Business Auxiliary Services on sales commission paid by the appellant for selling/marketing of their finished goods during the period June, 2008 - March, 2009.

Appellant contentions:- Ld. Counsel appearing for the respondent raised preliminary objection and submits that authorisation to file appeal does not bear any date. However, on perusal of documents, it was found that the said authorisation bears signature of one of the commissioners with a date on it. Accordingly, the preliminary objection raised by the ld. Counsel is incorrect and was rejected.

Reasoning of Judgment:-Heard both sides and perused the records.

On the merits, Tribunal found that the first appellate authority has allowed the appeal filed by the appellant by recording the following findings.

“I have carefully gone through the facts of the case, appeal memorandum and submission made at the time of personal hearing. As per the provisions of Rule 2(l) of the Cenvat Credit Rules, 2004 “Input Service” means any taxable service, used by the manufacturer, whether directly or indirectly, in or in relation to manufacturer of final product. I find that the definition of input service the words “sales promotion” has been included. I find that the appellant sold their finished goods through Commission Agents and the Commission agents charged commission for sale of the goods to the customer and paid service tax on such commission. The appellant has also produced Chartered Accountant certificate that brokers or agents are paid their commission amount separately. It clearly shows that the commission has been given for promoting the sale of the finished excisable goods of the appellant. Therefore the said service is definitely an input service of the appellant. The issue is no res integra as the specific issue of credit of service tax paid on sales commission agents has been allowed in case of Lanco Industries Ltd. v. CCE, Tirupati - 2010 (17) S.T.R. 350 (Tri.-Bang.); CCE, Raipur v. HEG Ltd. - 2010 (18) S.T.R. 446 (Tri.-Del.) and host of other cases.”

It can be seen from the above reproduced paragraph that the first appellate authority has relied upon a chartered accountant’s certificate which clearly shows the commission which has been paid by the appellant is for promoting the sale of finished goods. As against such categorical findings on the facts of the case, it was found that the Revenue’s appeal has not adduced any contrary evidence. The entire grounds of the appeal of the Revenue is basically trying to interpret the provisions of the Rule 2(l) of the Cenvat Credit Rules, 2004, to drive home a point; that the sales promotion and such other activities are related sales commission service and do not qualify for as an Input Service. Revenue has placed reliance on the judgment of the Hon’ble High Court of Gujarat in the case of Cadila Healthcare Ltd. - 2013 (30) S.T.R. 3 (Guj.) of the judgment leadership, but it is found that the lordship have categorically held that the Cenvat credit on the service tax paid on the sales commission per se is not allowed but if the said commission is paid for promotion, that would be a different. The factual matrix recorded by the first appellate authority indicates that the amount paid by the appellant is a commission for sales promotion expenses.

It was concluded that the judgment of the Hon’ble High Court of Gujarat in the Cadila Healthcare Ltd. (supra) would cover the issue in favour of the assessee.
Tribunal did not find any merits in the appeal filed by the Revenue. Accordingly, the impugned order was upheld as correct and legal and do not suffer from any infirmity.

Decision:-Appeal rejected.

Comment:-The substance of the case is that as per the provisions of Rule 2(l) of the Cenvat Credit Rules, 2004 “Input Service” includes in its ambit ‘sales promotion’ and so if it is proved by the assessee that the commission has been paid for promoting the sale of the finished excisable goods, the same will be qualify as input service and its credit will be admissible. Moreover, the decision given by the Gujarat High Court in the case of Cadila Healthcare can be distinguished if the commission paid to commission agent is for promoting the sales of the product.

Prepared By:Meet Jain

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PJ/CASE LAW/2015-16/2567

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