Whether the assessees were entitled to CENVAT credit on the services provided to them by commission agents?

PJ/Case law/2013-14/1638

Case:- M/s STOVEKRAFT PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, BANGALORE

Citation:-2013-TIOL-1006-CESTAT-BANG

Brief Facts:-The facts of the case is that the adjudicating authority has denied CENVAT credit to the extent of Rs.1.19 crores to the appellant for the period from May 2006 to May 2010 and has   imposed   equal   amount   of   penalty   on   them.   The   impugned   demand   arises   from   denial   of CENVAT   credit   of   service   tax   on   certain   amounts   paid   by   the   appellant   to   Bharat   Petroleum Corporation Ltd.   (BPCL for   short) and Indian   Oil Corporation   Ltd. (IOCL for   short) and to their L.P.G. distributors during the material period.

Appellant Contentions:- The Appellants submitted that they are manufacturers of L.P.G. stoves and these stoves were marketed through distributors of BPCL and IOCL. The Appellant paid lump sums annually to BPCL and IPCL, and also a commission to their distributors on the basis of the sales turnover. BPCL, IOCL and their distributors paid service tax under the head "business auxiliary services" on the respective amounts received by them from the appellant. The appellant took CENVAT credit of the service tax so paid. The case of the revenue is that this credit is not admissible to the appellant inasmuch as it related to activities beyond the place of removal. This case is based on the definition of "input service". The   case   of   the appellant is that they are entitled to CENVAT credit inasmuch as the service rendered by BPCL, IOCL   and   their   distributors   is   directly   related   to   the   business   activity   of   the   appellant,   viz. manufacture   of   stoves.   In   this   connection,   they   have   relied   on   the   Board's   Circular   No. 943/4/2011-CX dated 29/04/2011 (Sl. No. 5) and the learned counsel for the appellant has also referred   to   Final   Order Nos.   25007 & 25008/2013 dated 16/1/2013 passed by   this Tribunal in Central Excise Appeal Nos. 2555 & 2563/2011.

Respondent Contentions:-The learned Addl. Commissioner has reiterated the findings of the adjudicating authority.

Reasoning of Judgment:-We have considered the submission from both parties and perused their record, we have found   prima   facie   case is in favour of the appellant inasmuch   as it   is   not   in dispute   that   the   credit in   question   was taken   of   service   tax paid   by BPCL and IOCL and   their distributors on the amounts paid by the   appellant to them in relation to   the   latter's   business.   Prima   facie,   Board's   Circular   clarified   a   similar   point   in   favour   of assessees. Final order passed by this Tribunal also deals with the Board's Circular as applicable to a similar set of facts. One of the questions considered in that Final Order was whether the assessees   were   entitled   to   CENVAT   credit   on   the   services   provided   to   them by   commission agents. Prima facie, the appellant   was receiving   "commission agents'   services" from   BPCL and IOCL and their distributors.

In the above view of the matter, we grant waiver and stay as prayed for.

Decision:- Stay application allowed.

Comment:- The essence of this case is that appellant is entitled the Cenvat Credit of Service tax on   the   services   provided   to   them   by   commission agents. The view of department is that this credit is not admissible to the appellant inasmuch as it is related to activities beyond the place of removal but suchactivity, in reality is directly related to thebusiness activity of the appellant.

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PJ/Case law/2013-14/1638

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