2014 (2) TMI 856 - AT - Service Tax

Denial of cenvat credit - Credit taken of service tax and education cesses paid on sales commission paid - Waiver of pre-deposit Held that - Following CCE, Ahmedabad-II Vs. M/s. Cadila Healthcare Ltd. 2013 (1) TMI 304 - GUJARAT HIGH COURT - the services rendered by a commission agent would not fall within the ambit of the expression activities relating to business and consequently CENVAT credit would not be admissible on the commission paid to such commission agent - the appellant has not made out prima facie case on merits - the factum of having taken CENVAT credit on sales promotion was suppressed by the appellant willfully with an intention to avail CENVAT credit irregularly - They might have filed returns periodically but those returns did not disclose the above material fact to the department - The plea of bona fide belief has not been substantiated - the appellant has not made out prima facie case in their favour the appellant directed to pre-deposit an amount of Rupees Ten lakhs as pre-deposit upon such submission rest of the duty to be stayed till the disposal Partial stay granted.

Summary

Issues:
- Waiver of pre-deposit and stay of recovery regarding denied CENVAT credit and penalty imposition.
- Interpretation of 'input service' under Rule 2(l) of the CENVAT Credit Rules 2004.
- Comparison of decisions by different High Courts on claiming CENVAT credit on sales commission.
- Consideration of limitation plea against the impugned demand.

Analysis:
1. The appellant sought waiver and stay concerning the denial of CENVAT credit of Rs. 10,37,530/- and a penalty of Rs. 2,000/- imposed on them for service tax and education cesses paid on sales commission to IOCL. The lower authorities rejected the credit, stating that the service by IOCL did not qualify as an 'input service' as per Rule 2(l) of the CENVAT Credit Rules 2004.

2. The appellant's consultant cited various Stay Orders, Final Orders, and Circulars to support their claim for CENVAT credit on the sales commission paid to IOCL. However, the Superintendent (AR) argued against it, referencing a Gujarat High Court judgment that services by a commission agent did not fall under sales promotion, hence disallowing CENVAT credit.

3. In response, the consultant contended that the appellant's claim was under the main part of the Business Auxiliary Service definition, not the inclusion part, as in the Gujarat High Court case. They also argued for limitation, claiming a bona fide belief in entitlement to the credit, especially after a CBEC circular clarified the eligibility post-amendment in 2011.

4. The Tribunal analyzed the submissions and found no prima facie case for the appellant on either merit or limitation grounds. Referring to the Gujarat High Court's decision, the Tribunal held that services by a commission agent did not qualify as an input service, denying the appellant's claim. The plea of limitation was also dismissed, directing the appellant to pre-deposit a specified amount within a set timeline.

5. The Tribunal emphasized following the Gujarat High Court's ruling due to the absence of contrary binding decisions. It highlighted the importance of timely disclosure and substantiated pleas, ultimately denying the appellant's claim for CENVAT credit and penalty waiver based on the provided arguments and legal interpretations.

Conclusion:
The judgment by the Appellate Tribunal CESTAT Bangalore focused on the denial of CENVAT credit and penalty waiver sought by the appellant concerning sales commission paid to IOCL. The analysis delved into the definition of 'input service,' comparison of High Court judgments, and the plea regarding limitation. Ultimately, the Tribunal upheld the denial of credit, emphasizing the importance of legal interpretations and timely disclosure in such cases.