2012 (7) TMI 820 - AT - Central Excise

Commission agent services for sales orders qualify as 'input service' under Cenvat Credit Rules

BIRLA CORPORATION LTD. Versus COMMISSIONER OF C. EX., LUCKNOW

The Tribunal held that the service of commission agents for procuring sales orders qualifies as an 'input service' eligible for Cenvat credit under Rule ... CENVAT Credit - Commission agent - whether the services of commission agents for procuring sales orders received by the appellant is an input service or not for the purpose of availing Cenvat credit - Held that:- Though, in the order-in-original dated 27-2-2009 the Additional Commissioner has given a finding that the commission and brokerage paid to the commission agents and brokers was the payment made for the service provided after the removal of cement from the place of removal and as such the said service does not fall within the ‘input service’ as defined under Rule 2(l) of the Cenvat Credit Rules, we find that no basis for this finding has been given. The services of commission agents/brokers are availed for procuring the sales orders against which the manufacturer makes direct supplies to the customers and the commission agents/brokers get the commission. These services, of commission agents/brokers are as in the nature of sales promotion, an activity specifically covered in the inclusive portion in the definition of input service. This service, in our view, would also be covered by the term “activity related to business” which was also covered by the definition of ‘input service’ during the period of dispute. We, therefore, hold that the services, in question, are covered by the definition of ‘input service’ - Following decision of Commissioner v. Abhishek Industries Ltd. [2007 (10) TMI 583 - CESTAT NEW DELHI], CCE, Ludhiana v. Rightway Fabrics Pvt. Ltd. [2012 (6) TMI 21 - CESTAT, NEW DELHI] and Lanco Industries Ltd. v. CCE, Tirupathi [2009 (7) TMI 125 - CESTAT, BANGALORE] - Decided in favour of assessee. Issues:Cenvat credit eligibility for service of commission agent for procuring sales orders.Analysis:The case involved the appellants, cement manufacturers, availing Cenvat credit on various services, including the service of commission agents for procuring sales orders. The department contended that this service did not qualify as an 'input service' and issued show cause notices for disallowing the Cenvat credit, demanding recovery, interest, and penalties. The Deputy Commissioner and Additional Commissioner confirmed the demands in their respective orders-in-original.On appeal to the Commissioner (Appeals), the original orders were upheld. The appellants then filed appeals along with stay applications. Despite being listed for hearing of stay applications only, the Tribunal decided to take up the appeals for final disposal due to the simplicity of the issue and waived the pre-deposit requirement with the consent of both parties.The main argument presented by the appellants was that the service of commission agents procuring sales orders for cement fell within the definition of 'input service' as per Rule 2(l) of the Cenvat Credit Rules. They relied on various Tribunal judgments supporting their stance. The department, represented by the ld. SDR, defended the impugned order, emphasizing the service's ineligibility for Cenvat credit.After hearing both sides, the Tribunal deliberated on whether the commission agents' services constituted an 'input service' for Cenvat credit purposes. The Tribunal disagreed with the Additional Commissioner's finding that the service did not fall within the definition of 'input service' without a proper basis. It noted that the commission agents' role in procuring sales orders was akin to sales promotion, an activity explicitly covered in the inclusive part of the definition of input service. The Tribunal also considered this service as an 'activity related to business,' which was encompassed in the definition during the relevant period. Relying on precedent judgments, the Tribunal concluded that commission agents' services for procuring sales orders were indeed covered by the definition of 'input service.'Consequently, the Tribunal found the impugned order disallowing Cenvat credit for the commission agents' service unsustainable and set it aside, allowing the appeals and stay applications in favor of the appellants.