2015 (4) TMI 821 - AT - Service Tax

CENVAT Credit - Reverse Charge Mechanism - Commission to agents outside India - Held that - Appellant failed to establish that such commission agent involved in the activity sales promotion, as explained in the decision of the Hon ble Gujarat High Court 2013 (1) TMI 304 - GUJARAT HIGH COURT . It is also observed that the appellant only placed the case law in relation to the services rendered, other than the services of commission paid to foreign agent. We find that the appellant in the reply to the show cause notice had taken a definite stand that the foreign agent had rendered the activity of sales promotion - Adjudicating authority should have examined the documents as enclosed with the reply to show cause notice before taking into the decision of the activities of foreign agents - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
1. Wrong availment of Cenvat Credit on commission paid to foreign agents.
2. Determination of nature of activities of foreign agents - sales promotion or sales commission.
3. Consideration of evidence and case laws by the adjudicating authority.
4. Decision on remand for fresh examination of evidences.

Analysis:
The appellants were involved in the manufacture of Radiators and Gaskets and paid service tax under reverse charge mechanism. The issue revolved around the appellant wrongly availing Cenvat Credit of a substantial amount paid as commission to their agents outside India. The adjudicating authority held the credit as inadmissible, imposing interest and penalty. The appellant contended that the payment to foreign agents was for sales promotion, supported by various documents and agreements. The Hon'ble Gujarat High Court's decision in a similar case was cited, emphasizing the eligibility of Cenvat Credit for sales promotion activities.

The dispute focused on whether the activities of the foreign agents constituted sales promotion or sales commission. The appellant argued that the foreign agents were engaged in extensive sales promotion activities, including trade fairs and seminars, as evidenced by certificates and agreements. On the other hand, the Authorized Representative maintained that there was insufficient evidence to support the claim of sales promotion, asserting that the activities were akin to sales commission. The Tribunal observed that the appellant failed to establish the nature of the foreign agents' activities as sales promotion, as per the Gujarat High Court's decision.

The Tribunal highlighted the need for a thorough examination of the documents provided by the appellant to determine the true nature of the foreign agents' activities. It was emphasized that the adjudicating authority should have scrutinized the evidence before reaching a decision. Consequently, the Tribunal decided to remand the matter to the adjudicating authority for a fresh determination based on a comprehensive review of the evidences and relevant case laws. The impugned order was set aside, and the adjudicating authority was directed to provide a fair opportunity for a hearing before reaching a new decision.

In conclusion, the appeal was allowed for remand, and the stay application was disposed of. The judgment underscored the importance of a meticulous examination of evidence and adherence to legal principles in determining the eligibility of Cenvat Credit, particularly concerning activities carried out by foreign agents.