2018 (3) TMI 747 - AT - Central Excise

Tribunal Allows CENVAT Credit for Input Services, Dismisses Revenue's Appeal

The Tribunal concluded that the respondent's availed service fell within the scope of 'input service,' allowing the CENVAT credit. The Revenue's demand of ... Input service - sales promotion - Business Auxiliary Service - CENVAT credit of service tax - pre-removal activitiesInput service - sales promotion - pre-removal activities - CENVAT credit of service tax - Business Auxiliary Service - Availment of CENVAT credit on sales commission paid to agents as Business Auxiliary Service for the period June 2013 to March 2014 was admissible and could not be disallowed as outside the definition of input service. - HELD THAT: - The Tribunal accepted the Commissioner(A)'s conclusion setting aside the demand for irregular CENVAT credit. The reasoning applies the CENVAT Credit Rules' inclusive concept of input services to encompass services used for clearance of final products up to the place of removal, and specifically notes that sales promotion activities are included within the definition of input service. The Tribunal relied on the Board's clarification (circular no.943/4/2011-CX dated 29th April 2011) which states that credit is admissible on services of sale of dutiable goods on commission basis, and on the High Court of Punjab & Haryana decision in Commissioner of Central Excise v. Ambika Overseas , which held that canvassing and procuring orders are pre-removal activities and constitute sales promotion falling within input services; those activities therefore entitle the recipient to CENVAT credit. The Tribunal distinguished the contrary view in Commissioner of Customs, Ahmedabad v. Cadila Healthcare Ltd. as not determinative of the present facts, noting that where commission payments have their genesis in procuring firm orders (pre-removal), they cannot be treated as post-removal and outside input services. Applying these principles, the Tribunal found the impugned disallowance without merit and upheld the set-aside order of the Commissioner(A).Demand for alleged irregular CENVAT credit on sales commission for June 2013 to March 2014 is unsustainable; the credit is admissible and the appeal of the Revenue is dismissed.Final Conclusion: The CESTAT dismissed the Revenue's appeal, holding that CENVAT credit of service tax on sales commission paid as Business Auxiliary Service (being sales promotion and pre-removal activity) was admissible for the period June 2013 to March 2014 and the demand confirmed by the original authority was set aside by the Commissioner(A). Issues:Dispute over availment of CENVAT credit for tax paid on sales commission for domestic and export sales under 'business auxiliary service.'Analysis:The Revenue contended that CENVAT credit was irregularly availed due to a limited definition of 'input service,' resulting in a demand of Rs. 24,00,483. The Commissioner set aside the demand, leading to the appeal.The Authorized Representative cited a decision from the High Court of Gujarat in support of the Revenue's position.The Consultant for the respondent referenced a circular clarifying that credit is admissible on services of sale of dutiable goods on commission basis.The issue revolved around whether the credit of Business Auxiliary Service on sales commission was disallowed after a change in the definition. The Tribunal clarified that credit is admissible for services used for clearance of final products up to the place of removal, including sale promotion activities.Additionally, the Tribunal referred to a decision from the High Court of Punjab & Haryana, which supported the inclusion of sales promotion activities under the definition of input services.The Tribunal analyzed the definition of 'input service' in the CENVAT Credit Rules, noting that advertisement of sale promotion is explicitly included. It emphasized that commission paid to agents is part of placing orders, not post-removal activities.Ultimately, the Tribunal concluded that the service availed by the respondent fell within the scope of 'input service,' and the disallowance of CENVAT credit by the Revenue was unjustified, leading to the dismissal of the Revenue's appeal.