2023 (12) TMI 6 - SCH - Central Excise

Foreign agent commission and input tax credit turned on service nature and documents; tribunal order set aside, remanded.

Whether commission paid to foreign agents qualifies for input tax credit depended on the true nature of the services and the contractual and documentary ... Input Tax Credit - commission paid to the foreign agent - challenge to the decision passed by the Division Bench of the High Court of Gujarat in Tax Appeal Nos.353/2010 and 204/2011 [2013 (1) TMI 304 - GUJARAT HIGH COURT] - HELD THAT:- The High Court found that the Tribunal had reversed the findings of the adjudicating authority without giving any reason in support thereof and had merely sought to compare the payments made for services rendered by a foreign agent as analogues to a clearing and forwarding agent who actually effects sales. It was contended that the sales promotion is a terms of art and an agent can be appointed only for that purpose and therefore, the nature of the agreement between the assessee and the agent; the invoices indicating the payments made to the agent would all be relevant factors to be considered while arriving at a finding as to whether the appellant-assessee is entitled to claim input tax credit - there are substance in the contention of learned senior counsel appearing for the appellant particularly having regard to the doubt expressed by the High Court with regard to the manner in which the CESTAT had reversed what had been stated by adjudicating authority. The High Court ought to have then remanded the matter(s) to CESTAT for a fresh consideration by giving an opportunity to the appellant to place on record the necessary documents including the agreement entered into by the assessee with the concerned agents, the relevant invoices etc. - matters are remanded to CESTAT for a fresh consideration. Issues involved: Claim of Input Tax Credit on commission paid to foreign agent.Summary:The appellant-assessee appealed against the judgment of the High Court of Gujarat regarding the claim of Input Tax Credit on commission paid to a foreign agent. The High Court observed that the Tribunal had reversed the findings of the adjudicating authority without providing reasons and had compared the services of a foreign agent to a clearing and forwarding agent. The appellant contended that the matter should have been remanded to the Tribunal for fresh adjudication considering the actual nature of the transaction with the agent. The appellant submitted the Agency Agreement with the foreign agent to support the claim that the payment was for sales promotion, entitling them to input tax credit under the CENVAT Credit Rules of 2004. The respondent-Department supported the impugned order, stating that the High Court had correctly interpreted the provisions and applied them to the facts of the case.The Supreme Court considered the submissions and the High Court's observations. It found merit in the appellant's contention, especially concerning the doubt expressed by the High Court regarding the Tribunal's decision. The Court held that the High Court should have remanded the matter to the Tribunal for fresh consideration, allowing the appellant to provide necessary documents such as the agreement with the agents and relevant invoices. Consequently, the judgments of the High Court and the CESTAT were set aside, and the matters were remanded to the CESTAT for a fresh adjudication on the commission paid to the foreign agent.The appellant was granted the opportunity to submit additional documents to assist the CESTAT in determining whether they were entitled to claim input tax credit on the payment to the foreign agent. The respondent-Department would have the chance to respond to any additional documents filed by the appellant. All contentions on both sides were left open to be presented before the CESTAT. The appeals were allowed, no costs were imposed, and pending applications were disposed of accordingly.