Appellate Tribunal defers decision on CENVAT credit eligibility pending High Court appeal

The Appellate Tribunal CESTAT Ahmedabad refrained from making a decision on the eligibility of CENVAT credit on service tax paid on sales commission due to a pending appeal before the High Court of Gujarat. The Tribunal emphasized the binding nature of the High Court's judgment within its jurisdiction and disposed of the appeal with the liberty for parties to return after the High Court's verdict on the pending appeal. No recovery or refund would be processed during this period, and the appeal was concluded accordingly.

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Issues involved:
Eligibility of CENVAT credit on service tax paid on sales commission.

Analysis:
The principal issue in the present appeal before the Appellate Tribunal CESTAT Ahmedabad pertains to the eligibility of CENVAT credit on the service tax paid on sales commission. The Advocate for the Revenue acknowledged that the matter had been previously addressed by the Hon'ble Gujarat High Court in cases such as C.C.E. Vs. Cadila Healthcare Ltd. and Astik Dyestuff Pvt. Ltd. vs. C.C.E. & Cus. The High Court held that sales commission paid to agents did not fall under the scope of sales promotion as defined in the 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004. The judgment emphasized that the decision of the jurisdictional High Court should prevail over circulars and judgments of other High Courts.

Furthermore, an explanation was added to the definition of 'input service' through Notification No.2/2016 CE(NT) dated 03.02.2016, which was interpreted by a Division Bench of the Tribunal as clarificatory and retrospective. This interpretation allowed for the admissibility of service tax paid on sales commission to CENVAT credit even for periods preceding 03.02.2016. However, the Revenue challenged this interpretation by filing a Civil Appeal before the High Court of Gujarat, which was pending at the time of the present appeal.

In light of the pending appeal before the High Court and the binding nature of the High Court's judgment within its territorial jurisdiction, the Tribunal deemed it inappropriate to make a decision based on the Division Bench judgment while the matter was sub judice before the High Court. Following a similar precedent set by a Division Bench in another case, the Tribunal disposed of the present appeal with the liberty for both parties to approach the Tribunal after the High Court's verdict on the pending appeal against the Division Bench judgment. It was clarified that no recovery or refund would be processed during this period, and the appeal was thus disposed of accordingly.

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