2016 (12) TMI 915 - AT - Central Excise

Tribunal affirms assessee's Cenvat credit for sales promotion expenses, based on amended rules

Commissioner of Central Excise & Service Tax Versus M/s Dwarikesh Sugar Industries Ltd.

The Tribunal dismissed the Revenue's appeal and affirmed the respondent assessee's entitlement to Cenvat credit on sales promotion expenses. The ... Cenvat Credit -Whether the respondent assessee is entitled to Cenvat credit on sales promotion expenses incurred by them during the period 2009-10 to 2013-14? - extended period of limitation - Held that: - it is evident that there can be no removal of the final products unless the assessee has sales orders in their hands. Thus, I hold that the sales commission/sales promotion expenses incurred by the appellant is expenditure or input service incurred or received prior to the removal of their final product. Accordingly, the said expenditure is allowable as an input service. Accordingly, I also hold in view of the sales promotion expenses duly recorded in the Books of Accounts maintained in the ordinary course of business, as found by the Revenue, the extended period of limitation is not applicable. Appeal dismissed - decided against Revenue-appellant. Issues:Whether the respondent assessee is entitled to Cenvat credit on sales promotion expenses incurred from 2009-10 to 2013-14.Analysis:The appeal was filed by the Revenue against the Order-in-Appeal passed by the Commissioner of Central Excise & Customs. The issue revolved around the entitlement of the respondent assessee to Cenvat credit on sales promotion expenses. The appellant, a manufacturer of excisable goods, received a Show Cause Notice regarding Cenvat credit availed on commission paid to Commission Agents. The Revenue contended that these payments did not qualify as input services for Cenvat credit. The appellant was asked to show cause as to why the Cenvat credit should not be demanded and recovered along with interest and penalty. The Joint Commissioner confirmed the demand, but the Commissioner (Appeals) allowed the appeal of the respondent assessee based on an amendment to the Cenvat Credit Rules, 2004.The Commissioner (Appeals) relied on a beneficial amendment to Rule 2(l) of the Cenvat Credit Rules, 2004, which clarified that sales promotion includes services by way of sale of dutiable goods on a commission basis. This clarification was deemed to have retrospective effect. The Tribunal's ruling in a similar case was cited to support this interpretation. The respondent assessee had incurred commission expenses for procuring orders and promoting sales of sugar, which were debited under the sales promotion account.The Revenue argued that the explanation to Rule 2(l) would have prospective, not retrospective, effect. However, the advocate for the respondent assessee supported the Commissioner (Appeals)' decision, citing a Tribunal ruling that explanations are generally inserted to clarify the meaning of rules and can have retrospective effect. After considering the arguments, the Tribunal found that the sales promotion expenses incurred by the appellant were allowable as input services under Rule 2(l) of the Cenvat Credit Rules, 2004, as they were incurred prior to the removal of final products and duly recorded in the Books of Accounts.Ultimately, the Tribunal dismissed the appeal of the Revenue, affirming the entitlement of the respondent assessee to Cenvat credit on sales promotion expenses. The respondent assessee was granted consequential benefits in accordance with the law.