2013 (11) TMI 915 - AT - Service Tax

Cenvat credit - Business Auxiliary Service - Services of commission agents Waiver of Pre-deposit - Revenue was of the view that the service of Business Auxiliary Service (commission agent) used for procuring the sales orders is not input service Held that - Relying upon CCE, Ludhiana vs. Rightway Fabrics Pvt. Ltd. 2012 (6) TMI 21 - CESTAT, NEW DELHI - The commission agent services are covered by the expression sales promotion and activities relating to business Thus it is covered by the definition of input service and would be eligible for Cenvat credit - The Tribunal being a creature of Central Excise Act, 1944 cannot go into the question of the vires of Rules framed thereunder and while deciding the issue - the Tribunal is required to go by Rules framed by the Central Government under the powers vested on it under Section 37 of the Central Excise Act and if the Cenvat Credit Rules permit Cenvat credit in respect of certain services, the same has to be allowed Prima facie the appellant have a strong case in their favour - The requirement of pre-deposit of Cenvat credit demand, interest thereon and penalty waived till the disposal Stay granted.

Summary

Issues:
- Eligibility of commission agent service for Cenvat credit under Central Excise duty
- Interpretation of the definition of input service under Rule 2(l) of the Cenvat Credit Rules

Analysis:

Issue 1: Eligibility of commission agent service for Cenvat credit under Central Excise duty
The case involved a sugar mill manufacturing sugar and molasses, availing Cenvat credit of service tax paid on commission agent services. The dispute arose when the department contended that commission agent services were not eligible for Cenvat credit as they were not considered input services. The Jurisdictional Deputy Commissioner confirmed the demand for Cenvat credit along with interest and imposed a penalty on the appellant. This decision was upheld by the Commissioner (Appeals), leading to the appeal before the Tribunal.

Issue 2: Interpretation of the definition of input service under Rule 2(l) of the Cenvat Credit Rules
The appellant argued that commission agent services for procuring sales orders fell within the definition of input service as per Rule 2(l) of the Cenvat Credit Rules. Citing precedents such as CCE, Ludhiana vs. Rightway Fabrics Pvt. Ltd., the appellant contended that commission agent services were integral to sales promotion and activities related to business, making them eligible for Cenvat credit. The respondent, however, referenced a contrary view in the case of Chemplast Sanmar Ltd. vs. CCE, Salem, highlighting a discrepancy in the interpretation of input services.

Upon review, the Tribunal acknowledged that commission agent services were availed to procure sales orders for finished goods during the disputed period. Relying on previous judgments, including Commissioner vs. Abhishek Industries Ltd., the Tribunal affirmed that commission agent services constituted sales promotion and activities related to business, falling within the ambit of input services eligible for Cenvat credit. Despite the contrasting view in the Chemplast Sanmar Ltd. case, the Tribunal emphasized its obligation to abide by the Cenvat Credit Rules framed under the Central Excise Act. The Tribunal concluded that the appellant had a strong prima facie case in their favor, warranting the waiver of pre-deposit requirements for the Cenvat credit demand, interest, and penalty. Consequently, the recovery of these amounts was stayed pending the appeal's disposal.

In summary, the Tribunal ruled in favor of the appellant, allowing the appeal and granting a stay on the recovery of the disputed Cenvat credit, interest, and penalty until the appeal's resolution.