2013 (10) TMI 993 - AT - Central Excise

CENVAT Credit Sales Commission as input service Waiver of Pre-deposit - Revenue was of the view that what is paid is nothing but sales commission and therefore, credit may not be available since it is nothing to do with the manufacturing activity of the appellant and the CENVAT credit is not admissible beyond the place of removal Held that - There was no dispute that what was paid to the appellant is only sale commission the agreement clearly provides that both IOCL and BPCL are promoting sale of the appellants products among the consumers of the OMC - the OMC would specifically recommend to the customers in the publicity materials - quality control and specifications are mentioned in the agreement itself - the appellant has made out prima facie case for waiver of pre-deposit - the requirement of pre-deposit of the dues waived and stay against recovery of the same is granted during pendency of the appeal Stay granted.

Summary

Issues:
Interpretation of agreement terms for promotion activities by Oil Marketing Companies (OMC) and applicability of CENVAT credit on sales commission.

Analysis:
The appellant, engaged in manufacturing various products, had an agreement with Oil Marketing Companies (OMC) for promoting their products through various means, including recommending products to customers and ensuring conformity to specifications. The department contended that the payment made to OMC was a sales commission, not related to manufacturing, thus not eligible for CENVAT credit beyond the place of removal.

The appellant relied on a previous Tribunal decision granting a stay on CENVAT credit, while the Revenue representative cited a High Court decision stating that commission paid to agents is not for sales promotion. The Tribunal noted that the previous decision did not discuss the agreement's terms and activities, unlike the present case where the agreement clearly outlined sales promotion activities by OMC.

Regarding the High Court decision, it was observed that in the cited case, there was no dispute that the payment was a sales commission, not related to sales promotion. However, in the present case, the agreement specified OMC's role in promoting sales and recommending products to customers, establishing a prima facie case for waiver of pre-deposit. Consequently, the Tribunal waived the requirement of pre-deposit and granted a stay on recovery during the appeal's pendency.