TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 1213
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....s are considered to be eligible input service under Rule 2(l) of the CENVAT Credit Rules, 2004 or not? iii) Whether the 'Explanation' inserted by notification No. 02/2016-CE(NT) dated 03.02. 2016 into the definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004 is retrospective in nature or otherwise? iv) Whether the Learned Tribunal erred in setting aside of the order in original dated 24.05.2018 without deciding the core issue? v) Whether the Learned Tribunal fell in error in not considering the position as specific allegation made in the show-cause notice as the bills raised by the assessee was only for commission on sales and in the explanation to the show-cause notice the assessee had stated that the remuneration paid in the form of commission was not only on account of commission on sales but the consignment stockist undertook much wider responsibility including warehousing, distribution, sales promotion etc. and whether the same should have been adjudicated by the Tribunal being the last fact-finding authority? 2. We have heard Mr. Uday Bhattacharya, learned Senior Standing Counsel assisted by Ms. Banani Bhattacharya and Ms. Ekta Sinha, learned Adv....
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....al. 4. The allegation against the respondent is that the commission paid to various parties was only for the purpose of procuring orders for the respondents and nothing more. Reliance was placed on copies of the sample bills wherein description of the work has been stated as commission on sales and, therefore, the Department was of the view that the Commission Agents apart from sale of the goods manufactured by the assessee have no role in respect of promotion of sales of the goods and thereby it cannot be treated as their input service and credit is not available to the respondent. The assessee's case in the reply to the show-cause notice was that the remuneration paid to the commission stockist in the form of commission was not only on account of commission on sales but they took wider responsibilities including warehousing, distribution, sales promotion and marketing activities for the respondent's products and focused on the buyer/ manufacturing industries to represent the respondent with regard to the quality of the product, competitive prices etc. Further, consignment stockist undertook advertisement campaign, participated in trade exhibition and other modes for promoting sa....
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....16 dated 03.02.2016 which states sales promotion includes services by way of sale of dutiable goods on commission basis in terms of the definition of Input Tax Service as amended by the said notification. Further, it was submitted that the basis of the show-cause notice appears to be the decision in the case of CCE, Ahmedabad-II Versus Cadila Healthcare 2013 (30) STR 3 (Guj) wherein it has been held that services provided by selling agents are not eligible input services. The respondent distinguished the said decision on facts as well as on the basis that services provided by consignment agents include sale promotion, warehousing and other services which are specifically included in the definition of input service as an input service. Further, it was submitted that in view of the conditions faced by the assessees across the country and credit being denied, an amendment was made in the CENVAT Credit Rules by adding an explanation under Rule 2(l) vide notification dated 03.02.2016, which states that for the purpose of Clause 2(l) sales promotion includes services by way of sale of dutiable goods on commission basis. By referring to the said explanation, it was submitted that in view ....
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....her associated services to the main activity and therefore they are not eligible for trading. Accordingly, the proposal in the show cause notice was confirmed. 7. Before the learned tribunal, the respondent reiterated the stand taken by them in the reply to the show cause notice. The learned tribunal perused the agreement, took into consideration the definition of input service as defined under Rule 2(l) of the rules with effect from 01.04.2011 and held that the services under taken by the concerned agents for sales promotion are included in the definition of the input services and the very basis for the adjudicating authority to deny credit was by placing reliance on the decision in Cadila Heath Care Limited for denying credit. The Learned tribunal also perused the amendment made to the definition of input service by way of insertion of the explanation vide a notification dated 03.02.2016 and after taking note of the certain decisions of the tribunal, it was held that the explanation being in the nature of clarification has to be held to be retrospective and accordingly agreed with the submissions made on behalf of the respondent. Further the learned tribunal held that invoking e....
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....o indicate that commission agent were involved in the activities of sales promotion and that the claim of the assessee was accordingly rejected. Thus, the Court took note of the factual position in the case that there was nothing to indicate that the commission agents were involved in the sales promotion activities, contrary to the case on hand where agreements were produced before the authority to show what is the nature of services rendered by those commission stockists. 10. Mr. Bhattacharyya referred to the sample invoices and submitted that in the invoices, it has been stated under the column description "commission for sales". The correctness of such an identical submission made before the tribunal was tested and after considering all the facts, the terms and conditions of the agreement and the nature of services rendered by the commission stockist the tribunal recorded an independent finding that the activities of the commission stockist is towards sales promotion as well. Therefore, the reliance placed on the decision in the case of Ambika Overseas by the respondent assessee was well justified. Further, on and after the insertion of the explanation in Section 2(l) vide noti....
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....e activity of sale promotion is specifically allowed and on many occasions the remuneration for same is linked to actual sale.......". Board circular directs that input service credit would be available when there is an element of sales promotion as sales promotion is a service. Thus, the conflict between the judgment and the circular is not as large as is perceived. Both the Board circular and case laws on the subject allow credit of input service, when the activity of the sales commission agent involves an element of sales promotion. 11. As could be seen from the above clarification, the decision in Cadila Health Care was also taken note of by the department and the position stood clarified that sales promotion would include services by way of sale of goods on commission basis. As pointed out by the Hon'ble Supreme Court in Commissioner of Income Tax Versus Vatika Township Private Limited (2015) 1 SCC 1 that if a legislation confers the benefit on some persons but without inflicting the corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the object of the legislature, then the presumption would be that su....
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....t should be eligible for the benefit of Cenvat credit. * Service tax therefore, paid on expenditure incurred by the assessee on advertisements sales promotion, market research will have to be allowed as input stage credit more particularly if the same forms a part of the price of final product of the assessee on which excise duty is paid. In other words, credit of input service must be allowed on expenditure incurred by the assessee which form a part of the assessable value of the final product. If the above is not done, as sought to be done by the department in the present case, it will defeat the very basis and genesis Cenvat i.e. value added tax. * What follows from the above discussion is that credit is availed on the tax paid on the input service, which is advertisement and not on the contents of advertisements. Thus it is not necessary that the contents of the advertisements must be that of the final product manufactured by the person advertising, as long as the manufacturer can demonstrate that the advertisement services availed have an effect of or impact on the manufacture of the final product and establish the relationship between the input service and the manufacture....