2015 (3) TMI 516 - AT - Central Excise

Waiver of pre deposit - CENVAT Credit - broker's service - Input service - Held that - From the records, it is seen that the distributor appointed by the appellant have undertaken sales promotion activity also inasmuch as they have placed advertisements for the products manufactured by the appellant in the print media. Further, we observe that in the case of Bhushan Steel Ltd., in a similar situation, the adjudicating authority had allowed Cenvat Credit. In the Ambika Overseas case 2011 (7) TMI 980 - PUNJAB & HARYANA HIGH COURT also, the Hon'ble Punjab & Haryana High Court has allowed Cenvat Credit treating the services rendered by commission agents as an input service. In view of the above, the appellant has made out a case for grant of stay. Accordingly, we grant unconditional waiver from pre-deposit of the dues adjudged and stay recovery thereof during the pendency of the appeal. - Stay granted.

Summary

Issues:
- Denial of Cenvat Credit on service tax paid for broker's service
- Interpretation of "input service" under Cenvat Credit Rules, 2004
- Comparison with similar cases and judicial precedents

Analysis:
1. The appeal challenged the denial of Cenvat Credit amounting to Rs. 1,48,42,549/- on service tax paid for broker's service, deemed as not an input service under Cenvat Credit Rules, 2004, by the Commissioner of Central Excise, Navi Mumbai. The adjudicating authority also imposed a penalty equivalent to the denied credit. The appellant contended that the brokers, acting as stockists and distributors, engaged in sales promotion activities for the appellant's products through advertisements, making it qualify as an input service as per Rule 2 (l) of the Cenvat Credit Rules. Reference was made to a similar case involving Bhushan Steel Ltd. where Cenvat Credit was allowed for sales promotion activities, emphasizing the entitlement to credit in the present scenario as well.

2. The Revenue, represented by the Additional Commissioner, argued that the Gujarat High Court's decision in CCE, Ahmedabad Vs. Cadila Healthcare Ltd. established a distinction between sales promotion and sales activities. According to this judgment, if a commission is paid for goods' sale, it does not qualify as an input service under Rule 2 (l) of the Cenvat Credit Rules. The Revenue contended that this legal precedent supported the denial of Cenvat Credit in the present case.

3. The Tribunal, comprising P R Chandrasekharan and Anil Choudhary, analyzed the submissions from both parties. It noted that the distributor appointed by the appellant engaged in sales promotion activities by placing advertisements for the appellant's products, similar to the situation in the Bhushan Steel Ltd. case where Cenvat Credit was allowed. The Tribunal referenced the Ambika Overseas case, upheld by the Punjab & Haryana High Court, where commission agents' services were considered as an "input service." Based on these precedents and the appellant's case, the Tribunal granted unconditional waiver from pre-deposit of the dues and stayed the recovery during the appeal's pendency.

This detailed analysis of the judgment highlights the issues, arguments presented by both parties, relevant legal provisions, comparison with similar cases, and the final decision rendered by the Tribunal.