service tax credit on commission service received

[Guest]

We are engaged in the manufacture of submersible pump set falling under Heading No. 84137010 of the First Schedule to the Central Excise Tariff Act, 1985. this is dutiable goods

for that We are paying commission to our commission agent in helping to get enquiry from clients, participating in tender for procuring sales order.

Please advise whether Service tax paid to commission agent on above activities fall under the definition of input service as laid down in the Rule 2(1) of CENVAT credit Rule 2004,

so can we take credit of input service for above commission service from commission agent and can utilized against excise duty ?

regards,

Manan Pandya

[YAGAY andSUN]

Dear Manan,

In many Tribunal decisions (upheld by Punjab and Haryana High Court, SB), it was well settled that Cenvat credit of service tax paid on service of Commission Agent is eligible as input service.

However, the well settled issue has been disturbed by decision of Gujarat High Court in CCE v. Cadila Healthcare (2013) 59 VST 386 (Guj HC DB) = 2013 (1) TMI 304 - GUJARAT HIGH COURT where it has been held that service of commission agent is not eligible as input service.for purpose of Cenvat credit.

Though the assessee company has filed appeal before Supreme Court, the decision of Gujarat High Court stands, unless stay is granted.

This is for your kind information.

Regards

YAGAY and SUN

(Management and Indirect Tax Consultants)

[Madhukar N Hiregange]

The activity your commission agent is doing is pre sales and also sales promotion and not the commission agent post manufacture / removal. In my opinion eligible- however clarity on the activity needs to be there and preferable nomenclature as to what is exactly the activity to avoid disputes.

[YAGAY andSUN]

Dear Manan,

It does not have any weightage, whether it is pre sales or post sales activity but what is the substance of the acitivity and what accounting treatment you provide for this activity after checking the material facts (as per the Indian Accounting Standards), would determine the availability of CENVAT credit. If you book it at sales promotion, then, you would be eligible for CENVAT credit and if you book it as commission to agents then you would not be eligible for CENVAT credit. Differentiation between the sales promotion activity and commission to agent has been enumerated in the CCE v. Cadila Healthcare (2013) 59 VST 386 (Guj HC DB) = 2013 (1) TMI 304 - GUJARAT HIGH COURT.

Please check the material facts, go through the above mentioned judgment and accounting treatments, before taking any action on this aspect.

Regards,

YAGAY and SUN(Knowledge is power, when shared)

(Management and Indirect Tax Consultants)

[Mahir S]

In the query, it has been written that " We are paying commission to our commission agent ".....

Hence, it appears that any commission given to commission agents directly or indirectly is nothing but commission paid to them as commission agents.

You can avail cenvat credit on it.

AI Summary

Cenvat credit eligibility for commission services remains uncertain due to conflicting rulings and depends on substance and accounting treatment. Cenvat credit for service tax on commission agent services depends on the substance of the activity and the accounting treatment; tribunal precedents favouring input service recognition have been disturbed by a contrary Gujarat High Court decision, so eligibility turns on whether payments are documented and booked as sales promotion or as commission to agents.