2014 (6) TMI 548 - AT - Central Excise

Denial of CENVAT Credit - whether the service tax paid on commission agent services is available as Cenvat credit to the appellants by treating the same as input services in terms of Rule 2(l) of Cenvat Credit Rules, 2004 - Held that - Circular No. 943/4/2011-CX., dated 29-4-2011 issued by the Board clarifies that even after the deletion of expression activities related to business from the definition of input services, the credit of Service Tax paid on the sales promotion activities and on the services of sales of dutiable goods on commission basis would be admissible as credit. It is the contention of the learned advocate that even after the activities related to business stand deleted from the definition of inputs credit, as per the Board s Circular, the Service Tax paid on commission agent services would be available. However, he clarifies that period involved in the present case is prior to the amendment to the definition of input services - Following decision of C.C.E., Ludhiana v. Abhishek Industries Ltd. as reported in 2007 (10) TMI 583 - CESTAT NEW DELHI - Decided in favour of assessee.

Summary

Issues: Denial of Modvat Credit of Service Tax on commission agent services, eligibility of commission agent services as input services for Cenvat credit.

Analysis:
1. The judgment involves the confirmation of duty against the applicant by denying them the benefit of Modvat Credit of Service Tax paid on commission agent services, along with imposition of penalties under the Finance Act, 1994.
2. The appellants, engaged in sugar manufacturing, availed the services of a commission agent for selling their final product and paid Service Tax under Business Auxiliary Services category. The dispute arose regarding the eligibility of Cenvat credit for the Service Tax paid on commission agent services.
3. The key question was whether the Service Tax paid on commission agent services qualifies as Cenvat credit under Rule 2(l) of Cenvat Credit Rules, 2004. The Revenue contended that these services do not constitute input services as they are post-manufacturing and post-clearance activities, while the appellants argued that these services were crucial before goods clearance.
4. The Commissioner (Appeals) noted conflicting Tribunal decisions on the issue. While one decision held commission agent services as eligible input services, another decision took a contrary view. The appellants cited various Tribunal judgments supporting their claim that commission agent services are directly related to business activities and should be treated as input services.
5. The Tribunal observed that certain judgments, including the case of Bhilai Auxiliary Industries, supported the admissibility of Modvat credit for Service Tax paid on commission agent services. It was noted that subsequent decisions like the Chemplast Sanmar Ltd. case did not consider these earlier judgments, indicating a lack of consistency in the interpretation of the law.
6. Additionally, a Circular issued by the Board clarified that even after the deletion of "activities related to business" from the definition of input services, credit for Service Tax paid on sales promotion activities and commission-based sales services would be admissible. The Tribunal considered this Circular along with the precedent judgments in favor of the appellants' case.
7. Consequently, the impugned order denying the credit was set aside, and the appeal was allowed in favor of the appellants, granting them consequential relief. The Tribunal found merit in the appellants' arguments and the supporting judgments, leading to a decision in their favor.