2014 (8) TMI 15 - AT - Central Excise

Court Upholds Cenvat Credit for Sales Commission as Sales Promotion Expense

The judge upheld the first appellate authority's decision allowing Cenvat Credit on service tax paid on Business Auxiliary Services for sales commission, ... Cenvat credit of service tax on sales commission - definition of Input Service under the Cenvat Credit Rules - sales promotion as an input service - evidentiary value of a Chartered Accountant's certificate - precedential application of Cadila Healthcare LtdCenvat credit of service tax on sales commission - definition of Input Service under the Cenvat Credit Rules - sales promotion as an input service - evidentiary value of a Chartered Accountant's certificate - precedential application of Cadila Healthcare Ltd - entitlement to Cenvat credit of service tax paid on sales commission paid to commission agents for the period June 2008 - March 2009 - HELD THAT: - The first appellate authority found, relying on the definition of 'Input Service' in Rule 2(1) of the Cenvat Credit Rules and on a Chartered Accountant's certificate, that the commission paid to agents was for promoting sale of the appellant's finished excisable goods and therefore constituted an input service. The Revenue produced no contrary evidence to rebut the factual finding that the payments were for sales promotion. The Tribunal further observed that the Gujarat High Court's decision in Cadila Healthcare Ltd supports allowance where the commission is for promotion. Since the factual finding that the commission related to sales promotion stood unchallenged by admissible contrary evidence and falls within the definition of input service, the appellate order allowing Cenvat credit was upheld. [Paras 5, 6, 7, 8]Impugned order allowing Cenvat credit of service tax on sales commission upheld; Revenue's appeal rejected.Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the first appellate authority's order granting Cenvat credit of service tax paid on sales commission for the period June 2008 - March 2009. Issues:- Appeal against allowing Cenvat Credit on service tax paid on Business Auxiliary Services for sales commission.Analysis:1. The Revenue filed an appeal against the order allowing Cenvat Credit on service tax paid on Business Auxiliary Services for sales commission. The first appellate authority permitted the credit based on the definition of 'input service' in the Cenvat Credit Rules 2004, including 'sales promotion.' The authority considered the commission paid to be for promoting the sale of finished goods, supported by a Chartered Accountant certificate.2. The first appellate authority's decision was based on factual findings and the absence of contrary evidence from the Revenue. The Revenue's appeal focused on interpreting the Cenvat Credit Rules to argue that sales promotion activities do not qualify as an input service. They cited a High Court judgment but failed to provide evidence contradicting the commission's purpose for sales promotion.3. The judge referred to the High Court judgment cited by the Revenue, which distinguished between sales commission and commission for promotion. The judge found that the commission paid in this case was for sales promotion expenses, aligning with the Chartered Accountant's certificate and the first appellate authority's findings.4. Ultimately, the judge upheld the first appellate authority's decision, stating that the High Court judgment supported the assessee's position. The appeal by the Revenue was deemed meritless, and the impugned order was upheld as correct and legal without any infirmity. The appeal was rejected, and the judgment was pronounced on 18.7.2014.