2012 (7) TMI 820 - AT - Central Excise

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

The Tribunal held that the service of commission agents for procuring sales orders qualifies as an 'input service' eligible for Cenvat credit under Rule ... Input service - Cenvat credit - services of commission agents/brokers - sales promotion - activity related to business - definition of 'input service' under Rule 2(l)Input service - services of commission agents/brokers - sales promotion - activity related to business - Cenvat credit - Whether services of commission agents for procuring sales orders are covered by the definition of 'input service' and thus eligible for Cenvat credit. - HELD THAT: - The Tribunal examined the nature of the services paid to commission agents/brokers and found that those services were availed to procure sales orders against which the manufacturer made direct supplies. The adjudicating authority's conclusion that the service was rendered after removal and therefore outside the scope of 'input service' was not supported by any basis in the order. The Tribunal held that such services constitute sales promotion and fall within the inclusive portion of the definition of 'input service', and are also encompassed by the expression 'activity related to business' which applied for the period in dispute. The view is reinforced by earlier Tribunal decisions which held that commission-agent services procured by a manufacturer to obtain sales orders on commission are activities related to the business of manufacture and are covered by the definition of 'input service'. Applying this determinative reasoning, the disallowance of the Cenvat credit in respect of the commission-agent service was found unsustainable.The services of commission agents/brokers are 'input service' within the meaning of Rule 2(l) and the disallowance of Cenvat credit in respect of these services is set aside; appeals and stay applications allowed.Final Conclusion: The Tribunal allowed the appeals, set aside the orders disallowing Cenvat credit claimed on commission-agent services for the specified periods, and directed that the credit not be denied for those services. 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.