2018 (8) TMI 1385 - AT - Central Excise

Tribunal allows cenvat credit on commission paid to agent for sales

The Tribunal upheld the order allowing the respondent-assessee to avail cenvat credit on commission paid to the commission agent for sales made on its ... Cenvat credit on service tax paid to commission agent - Business Auxiliary Service - sales promotion v. marketing/sale of goods - Reverse charge mechanism - Tribunal precedent and independent view in face of conflicting High Court decisionsCenvat credit on service tax paid to commission agent - Business Auxiliary Service - sales promotion v. marketing/sale of goods - Tribunal precedent and independent view in face of conflicting High Court decisions - Assessee entitled to avail cenvat credit on service tax paid to a commission agent who effected sales on behalf of the assessee. - HELD THAT: - The Tribunal considered conflicting High Court decisions (notably Cadila Healthcare and Ambika Overseas) and followed its earlier reasoning in Dwarikesh Sugar Industries Ltd., which in turn relied on the Tribunal's decision in Essar Steel India Ltd. and Maheshwari Solvent Extraction Ltd. The Tribunal examined the scope of Business Auxiliary Service and distinguished the approach that limits the activity to 'sales promotion' by recognising that where an agent effects the sale or is engaged in marketing/sale of goods produced or belonging to the assessee, the service falls within the ambit of creditable input service. In view of these precedents and taking an independent view despite contrary High Court authority, the Tribunal held that commission paid to an agent who effected sales on behalf of the assessee attracts entitlement to cenvat credit under the Cenvat Credit Rules.Impugned order allowing cenvat credit is upheld; Revenue's appeal dismissed and cross-objections disposed of accordingly.Final Conclusion: The Tribunal affirmed the Commissioner (Appeals) order and dismissed the Revenue appeal, holding that cenvat credit is admissible on service tax paid to a commission agent who effected sales on behalf of the assessee, following Tribunal precedents and applying an independent view in the face of conflicting High Court decisions. Issues Involved:Whether the respondent-assessee is entitled to avail cenvat credit on commission paid to the commission agent who affected the sale on behalf of the respondent.Analysis:The appeal was filed by the Revenue against an order allowing cenvat credit for service tax paid to a commission agent for sales outside India under reverse charge mechanism. The Revenue contended that as per decisions by the Gujarat High Court and the Supreme Court, the respondent was not entitled to avail cenvat credit. The respondent, represented by an advocate, relied on a different case law and argued in favor of affirming the impugned order. After hearing both parties, the Tribunal identified the key issue as the entitlement of the respondent to cenvat credit on commission paid to the commission agent for sales. The Tribunal referred to a previous case involving Dwarikesh Sugar Industries Ltd. where it was concluded that the assessee is indeed entitled to take cenvat credit in such situations.The Tribunal's decision was based on a detailed analysis of relevant case laws, including the Cadila Healthcare Ltd. case and the Ambika Overseas case. It was noted that the Gujarat High Court's decision did not consider the issue of marketing or sale of goods by the commission agent, which was crucial in determining eligibility for cenvat credit. The Tribunal also referenced a judgment by the Punjab & Haryana High Court supporting the admissibility of cenvat credit on service tax paid to a selling agent for the sale of goods. In light of conflicting judgments, the Tribunal independently decided the issue, aligning with its previous ruling in the Essar Steel India Ltd. case. The Tribunal emphasized that the assessee is entitled to avail cenvat credit on commission paid to the selling agent for selling goods, as per Rule 2(l) of the Cenvat Credit Rules, 2004.Ultimately, the Tribunal upheld the impugned order, stating that the assessee is entitled to take cenvat credit on service tax paid as commission to the commission agent for sales made on behalf of the assessee. The decision was based on the settled issue following previous judgments and independent analysis by the Tribunal. As a result, the appeal by the Revenue was dismissed, and cross objections were disposed of accordingly.