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2013 (8) TMI 232 - AT - Central ExciseCenvat Credit - Input services - Commission paid to the foreign agents - whether the manufacturer is entitled for credit in respect of credit of Service Tax paid on commission agents service. Held that - Hon ble High Court of Gujarat in the case of Cadila Healthcare Ltd. 2013 (1) TMI 304 - GUJARAT HIGH COURT (Guj.), held in favour of the Revenue - Court is unable to concur with the contrary view taken by the Punjab and Haryana High Court in Commissioner of Central Excise, Ludhiana v. Ambika Overseas 2011 (7) TMI 980 - PUNJAB & HARYANA HIGH COURT Decided against the Assessee. Limitation - Held that - In the case of Cadila Healthcare Ltd., the decision of the Tribunal was in favour of the manufacturer, therefore, it can not be presumed any suppression of fact Merit in the contention of the applicant that the demand by invoking extended period of limitation is not sustainable. Held that - Applicants are directed to deposit an amount of Rs.1 Crore (Rupees One Crore only) within a period of eight weeks Subject to compliance of pre-deposit, stay granted.
Issues Involved:
1. Entitlement of the manufacturer to credit of Service Tax paid on commission agents' services. 2. Invocation of the extended period of limitation for the demand. Issue-wise Detailed Analysis: 1. Entitlement of the manufacturer to credit of Service Tax paid on commission agents' services: The core issue in this appeal is whether the manufacturer is entitled to credit for the Service Tax paid on commission agents' services. The applicant argued that they paid Service Tax for commission agents' services and regularly filed monthly returns showing the credit taken. They cited the Hon'ble High Court of Punjab & Haryana's decision in Ambika Overseas 2012 (25) STR 348 (P&H), which allowed such credit, and contended that the demand confirmed by invoking the extended period of limitation is not sustainable. They also referenced the Supreme Court's decision in Coromandel Fertilizers 1984 (17) ELT 607 (SC) and a Board's circular clarifying that credit is admissible on services of dutiable goods on a commission basis. The Revenue, however, relied on the Hon'ble High Court of Gujarat's decision in Cadila Healthcare Ltd. 2013 (30) STR 3 (Guj.), which held that manufacturers are not entitled to credit on the Service Tax paid on commission agent services. The court found that the service provided by commission agents does not fall within the purview of sales promotion as defined under Rule 2(l) of the CENVAT Credit Rules. The Adjudicating Authority distinguished between sales promotion and direct sales, concluding that commission agents are directly concerned with sales rather than sales promotion. The Tribunal had previously reversed the Adjudicating Authority's findings without detailed reasoning, relying on its earlier decisions related to Clearing and Forwarding agents. The court, however, emphasized that the commission agents' services do not align with the definition of sales promotion and are not analogous to activities such as accounting, auditing, or financing, which are included in the definition of input services. Ultimately, the court upheld the Revenue's position, finding that the commission agents' services do not qualify for CENVAT credit as they are not used directly or indirectly in the manufacture or clearance of final products and do not fall within the inclusive part of the definition of input service. 2. Invocation of the extended period of limitation for the demand: Regarding the extended period of limitation, the applicant contended that approximately Rs.1,50,00,000 of the demand falls beyond the normal period of limitation. The court found merit in this contention, noting that the Tribunal's decision in Cadila Healthcare Ltd. was initially in favor of the manufacturer, which could justify the applicant's belief in their entitlement to credit. Considering the facts and circumstances, the court directed the applicant to deposit Rs.1 Crore within eight weeks, with the pre-deposit of the remaining amount of duty, interest, and penalty waived and recovery stayed during the pendency of the appeal. Conclusion: The court concluded that the manufacturer is not entitled to credit for the Service Tax paid on commission agents' services, aligning with the Hon'ble High Court of Gujarat's decision in Cadila Healthcare Ltd. However, the court acknowledged the applicant's argument regarding the extended period of limitation and provided partial relief by requiring a pre-deposit of Rs.1 Crore while waiving the remaining amount during the appeal's pendency.
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