Tribunal Rules Cenvat Credit Admissible for Sales Commission on 'Ghadi' Products, Overturning Prior Order.

The Tribunal allowed the appeals, setting aside the impugned order that disallowed the sales commission paid for promoting sales of 'Ghadi' brand products. It held that Cenvat credit is admissible on commission paid for sales promotion activities, considering the Explanation in Rule 2(l) of the Rules, 2004 as declaratory and effective retrospectively. The Tribunal emphasized that there is no prohibition on availing Cenvat credit for sales promotion services involving the sale of dutiable goods on a commission basis, thus ruling in favor of the appellants.

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Issues:
Appeal against disallowance of sales commission paid for promoting sales.

Analysis:
The appeal was filed against the order dated 7.10.2016 disallowing the sales commission paid by the appellant to its agent for promoting sales of 'Ghadi' brand washing cake and powder. The period of dispute was from June, 2013 to January, 2015. The Tribunal considered the issue in light of previous judgments and circulars. The Tribunal referred to the case of M/s. Essar Steel India Ltd. vs. CCE, Surat and M/s. Mangalam Cement Ltd. vs. CCE Udaipur, where it was clarified that Cenvat credit is admissible on commission paid for sale promotion activities. The circular dated 29/04/2011 and Notification No. 2/2016-CE (NT) dated 03/02/2016 endorsed by the Central Government were also considered. The Tribunal held that the notification should be considered declaratory in nature and effective retrospectively.

The Tribunal noted the conflicting views of different High Courts on the issue, but relied on the circular and notification to support its decision. It emphasized that there is no bar on availing Cenvat credit on sales promotion services by way of sale of dutiable goods on commission basis. By inserting an Explanation in Rule 2(l) of Rules, 2004, the legislature clarified that sales promotion includes services by way of sale of dutiable goods on commission basis. The Tribunal concluded that the Explanation should be considered declaratory and effective retrospectively, in favor of the assessee.

Based on the settled position of law and previous orders, the Tribunal found no merits in the impugned orders disallowing the sales commission. Consequently, the Tribunal allowed the appeals in favor of the appellants. The impugned order was set aside, and the appeal filed by the appellant was allowed.

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