TaxTMI 
TaxTMI 
2016 (4) TMI 232
X X X X Extracts X X X X
X X X X Extracts X X X X
....s agents for rendering the services during the period November 2005 to March 2008. The Appellant entered into agreements known as "International Market Service Agreements" with various companies at overseas for rendering sales promotion service. According to the Revenue, the services were received and utilized by the Appellant for selling of the goods and not in relation to the manufacture of the goods and clearance of the final product from the place of removal, which could not be considered as "input service" as defined under Rule 2(l) of the Rules, 2004. 2. A Show Cause Notice dt.01.01.2009 was issued, proposing to deny the CENVAT Credit alongwith interest and to impose penalty availed by the Appellant, in respect of Service Tax paid on commission to non-residents or commission agents/consignment agent for domestic service for the period from November 2005 to March 2008. On the same issue, nine Show Cause Notices were issued for the period April 2008 to February 2014. By the impugned order, the Adjudicating authority disposed of all the Show Cause Notices and confirmed the demand of CENVAT Credit alongwith interest and also imposed penalty on the Appellant. 3. The learned ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y limitation. The learned Advocate submitted written submission alongwith compilation of case laws. 5. The learned Authorised Representative on behalf of the Revenue reiterates the findings of the Adjudicating authority. He submits that the Hon'ble Gujarat High Court in the case of Cadila Healthcare Ltd (supra) categorically stated that the commission paid to various agents concerned with sales would not come within the definition of "input service" under Rule 2(l) of Rules, 2004. He submits that the Board Circular would not be applicable in this case and the decision of Hon'ble Gujarat High Court is binding on the Revenue. He submits that the Hon'ble Gujarat High Court in the case of Astik Dyestuff Pvt. Ltd. Vs CCE & C. - 2014 (34) STR 814 (Guj.), observed that if there is a conflict between the jurisdictional High Court and CBEC Circular, the decision of jurisdictional High Court is binding to the Department rather than CBEC Circular. He drew the attention of the Bench to the relevant portions of the various agreements. He submits that except one agreement, all other agreements would show that the Appellants paid the sales commission to the foreign agents. He refer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....etworking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal; (B) With effect from 01.03.2008: (l) "input service" means any service, - (iii) used by a provider of taxable service for providing an output service; or (iv) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal; but excludes services, - ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....care Ltd (supra) held that the sales promotion is covered within the definition of "input service" and CENVAT Credit is admissible. The relevant portions in the case of Cadila Healthcare Ltd (supra) are reproduced below:- (vii) The expression "sales promotion" has been defined in the Oxford Dictionary of Business to mean an activity designed to boost the sales of a product or service. It may include an advertising campaign, increased PR activity, a free-sample campaign, offering free gifts or trading stamps, arranging demonstrations or exhibitions, setting up competitions with attractive prizes, temporary price reductions, door-to-door calling, telephone selling, personal letters etc. In the Oxford Dictionary of Business English, sales promotion has been defined as a group of activities that are intended to improve sales, sometimes including advertising, organizing competitions, providing free gifts and samples. These promotions may form part of a wider sales campaign. Sales promotion has also been defined as stimulation of sales achieved through contests, demonstrations, discounts, exhibitions or tradeshows, games, giveaways, point-of-sale displays and merchandising....
X X X X Extracts X X X X
X X X X Extracts X X X X
....various agents would not be covered in this expression since it cannot be stated to be a service used directly or indirectly in or in relation to the manufacture of final products or clearance of final products from the place of removal. The includes portion of the definition refers to advertisement or sales promotion. It was in this background that this court has examined whether the services of foreign agent availed by the assessee can be stated to services used as sales promotion. In the absence of any material on record, as noted above to indicate that such commission agents were involved in the activity of sales promotion as explained in the earlier portion of the judgement, in the opinion of this court, the claim of the assessee was rightly rejected by the Tribunal. Under the circumstances, the adjudicating authority was justified in holding that the commission agent is directly concerned with the sales rather than sales promotion and as such the services provided by such commission agent would not fall within the purview of the main or inclusive part of the definition of input service as laid down in Rule 2(l) of the Rules." 11. In the case of Cadila Healthcare Ltd (supra....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... - Providing assistance for filling documents for speedy formalities, transportation, survey, inspection and handling. - Providing assistance for expeditious settlement of claims, Stemcor could be liasing with the buyers for claim settlements and help in appointment of surveyors and insurance agencies. - Provide assistance for recovery of dues, if any, help in exploring other export markets, providing market feed back and developing clientele for enhancing the market share. - Provide assistance in identifying and appointing agencies for providing legal services in the event of disputes if any with clients in the clause of ESTL's international marketing. ARTICLE-V AGENCY COMMISSION In consideration of the service provided by STEMCORSEA, ESTL agrees to pay STEMCOR commission at USD 15 per metric ton of all its export sales including export sales to STEMCORSEA as a principal. This percentage may, however, modified for individual shipments by mutual agreement." 12. The learned Authorised Representative on behalf of the Revenue also drew the attention of the Bench to another agreement dt.01.02.2008, which is also under the name and st....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... & PAYMENT In consideration of the Services provided by ESHL, ESTL agrees to pay ESHL a commission at such rate as may be mutually agreed in both ESHL and ESTL on all the exports made to the foreign buyers. The said commission may however be modified by individual shipments as per the mutual agreement of the Parties. ESTL shall provide full details such as name of vessel, details and quantity shipped, invoice value, etc, to ESHL on completion of each shipment. On receipt of the said details ESHL will raise necessary debit notes/invoices on ESTL at the agreed commission rate. ESTL will remit the commission against above debit notes immediately upon realization of sale proceeds of the relevant exports to ESHL's bank account as per the details to be provided by ESHL. 13. The learned Authorised Representative also drew the attention of the Bench to the similar agreements with other Companies. It is contended that the Hon'ble Gujarat High Court in the case of Cadila Healthcare Ltd observed that in the case of sales promotion, larger population of consumers is targeted. Such activities relate to sales in general to the consumer at large. It is contended that none....
X X X X Extracts X X X X
X X X X Extracts X X X X
....depot/warehouse on behalf of its clients. The Adjudicating authority held that the Appellant was providing Business Auxiliary Service and was not eligible for the benefit of Notification No.13/2003-ST, dt.20.06.2013, which exempted Service Tax on the Business Auxiliary Service provided by the commission agents. As per Explanation to the said notification, "Commission Agent" means a person who causes sale or purchase of the goods on behalf of another person and commission is based on the quantum of such sale or purchase. The Tribunal, after going through the agreement, held that the Assessee was a commission agent and entitled to the benefit of exemption notification. The relevant portion of the agreement in the case of M/s Brindco Sales Ltd (supra) is reproduced below:- "a) To procure all orders independently and arrange for completion of necessary excise formalities/payment of excise duties prior to dispatch from KAM distillery, where necessary. b) To make all arrangements for distributing the products in the Territory as instructed by KAM. c) To raise the invoices on behalf of KAM for all sales effected. d) To collect payment from customers on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inked with sale of goods would cover sales promotion. The learned Authorised Representative submits that the Notification No.2/2016-CE (supra) would be effective prospectively. We find that the Hon'ble Supreme Court in the case of CIT Vs Podar Cement (P) Ltd - (1997) 5 SCC 482 observed that the circumstances under which the amendment was brought in existence and the consequences of the amendment will have to be taken care of while deciding the issue as to whether the amendment was clarificatory or substantive in nature and, whether it will have retrospective effect or it was not so. In the present case, the Explanation inserted in Rule 2(l) of Rules 2004, is in conformity with the Board Circular dt.29.04.2011, and extended the benefit to the Assessee. It may be noted that after Board Circular, dt.29.04.2011, the Hon'ble Punjab & Haryana High Court in the case of Commissioner of Central Excise, Ludhiana Vs Ambika Overseas - 2012 (25) STR 348 (P&H), on the identical issue dismissed the appeal filed by the Revenue. In that case, the issue was raised before the Hon'ble High Court as to whether the CESTAT was correct in holding that the Respondent is entitled to avail CENVAT....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt has taken the credit is not the prescribed document, it is to be noted that the respondent is not a service provider per se. They are basically the service recipients. They are required to pay service tax as a deemed service provider. Under these circumstances, the respondents have paid service tax using TR-6 challans and taken credit treating the said documents as documents covered by Rule 9(1) of the Cenvat Credit Rules, 2004. There is nothing irregular about it." 9. In the light of the aforesaid finding, learned counsel for the revenue was unable to justify that the claim of cenvat credit by the assessee was erroneous in any manner. No perversity or illegality could be shown by the learned counsel in the order passed by the Tribunal which may call for any interference by this Court." 20. But, the Hon'ble Gujarat High Court in the case of Cadila Healthcare Ltd (supra) was unable to concur with the contrary view taken by the Hon'ble Punjab & Haryana High Court in the case of Commissioner of Central Excise, Ludhiana Vs Ambika Overseas (supra). The Hon'ble Gujarat High Court held that this issue is concerned, the question is answered in favour of the Reven....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in favour of the Assessee and a few High Courts taking the contrary view. There was no decision of the Supreme Court on this question. The Taxation Laws (Amendment) Act which introduced the said Explanation does not say that the said Explanation shall have the effect retrospectively. The question is whether the said Explanation is merely declaratory and clarificatory in nature, in which case it will govern the previous assessment years as well or whether it is a substantial provision having effect only prospectively." "The provisions in Chapter III and IV of the Partnership Act, 1932 amply define and delineate duties, obligations and rights of the partners vis-`-vis the firm. The question yet remains where an individual is a partner in one capacity, e.g. as a representative of another person, can he have no other capacity vis-`-vis the firm. To be more precise, does the above position of law preclude an individual, who is a partner representing a HUF, from depositing his personal funds with the partnership and receiving interest thereon? Explanation 2 says in clear terms that there is no such bar. This is the legislative recognition of the theory of different capaci....