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2015 (9) TMI 575 - AT - Central ExciseCenvat Credit - Input services - Business auxiliary services being provided by the commission agents - Nexus with manufacturing activity - impact of the amendment to Rule 2(l) w.e.f. 1.4.2011 - The demands raised were confirmed by the Commissioner by distinguishing between the activity of Sales Promotion and Sales - Held that - the decisions of this Tribunal in the case of Rosa Sugar Works vs. CCE, Lucknow 2013 (11) TMI 1074 - CESTAT NEW DELHI is clearly applicable to this case. - Credit allowed. According to the circular dated 29-4-2011, the service of commission agents (Business Auxiliary Service) is covered by the term advertisement or sales promotion . In my view, there is nothing in this circular which is contrary to the provisions of law and hence the same would be binding on the Departmental officers. Thus, in view of this circular also, though it is in respect of definition of input service during period w.e.f. 1-4-2011, commission agents service would be cenvatable as the term advertisement and sales promotion was there in the definition of input service even during period prior to 1-4-2011.
Issues Involved:
1. Admissibility of Cenvat credit on service tax paid for services of sales commission agents. 2. Distinction between "Sales Promotion" and "Sales" activities. 3. Interpretation of the definition of "input service" under Cenvat Credit Rules. 4. Reliance on precedents and CBEC Circulars. Detailed Analysis: 1. Admissibility of Cenvat Credit on Service Tax Paid for Services of Sales Commission Agents: The appellants, manufacturers of steel products, were availing credit on service tax paid for services rendered by sales commission agents. A show-cause notice was issued claiming that such credit taken during 2007-08 to 2011-12 was not admissible under the Cenvat Credit Rules. The notice relied on the Tribunal's decision in Vikram Ispat vs. CCE Raigad, which held that services must meet the essential requirements of the definition of "input service" to be eligible for credit. The Commissioner confirmed the demands, interest, and penalties, distinguishing between "Sales Promotion" and "Sales" activities and relying on the Gujarat High Court's decision in CCE, Ahmedabad-II vs. Cadila Healthcare Ltd. 2. Distinction Between "Sales Promotion" and "Sales" Activities: The Commissioner differentiated "Sales Promotion" from mere "Sales," concluding that the services of sales commission agents do not qualify as "Sales Promotion" and thus are not eligible for credit. The appellants argued that their activities involved active sales promotion, supported by evidence such as letters to consumers, advertisements, and promotional materials. The Tribunal found that the appellants' activities, including approaching new clients and placing advertisements, clearly constituted "Sales Promotion" rather than mere "Sales." 3. Interpretation of the Definition of "Input Service" Under Cenvat Credit Rules: The Tribunal examined various judicial precedents and CBEC Circulars to interpret the definition of "input service." The CBEC Circular No. 943/04/2011-CX clarified that credit is admissible on services of sales of dutiable goods on a commission basis. The Tribunal noted that the same Commissioner had taken a different stand in a subsequent order, recognizing that credit is eligible on "Sales Commission" when it includes sales promotion. The Tribunal also referenced the Bombay High Court's interpretation in Ultratech Cement Ltd., which held that the definition of "input service" is broad and includes services integrally connected with the business of manufacturing final products, including sales promotion activities. 4. Reliance on Precedents and CBEC Circulars: The appellants relied on several judicial decisions supporting their view that sales promotion activities qualify for Cenvat credit. The Tribunal considered these decisions, including Ambika Overseas, Ultratech Cement Ltd., and Rosa Sugar Works, which supported the appellants' position. The Tribunal also distinguished the Cadila Healthcare Ltd. decision, noting that it pertained to mere sales activities rather than sales promotion. The Tribunal emphasized that the department's own circular and subsequent orders supported the admissibility of credit for sales promotion activities. Conclusion: The Tribunal concluded that the appellants' activities constituted "Sales Promotion" and not mere "Sales," thereby qualifying for Cenvat credit. The Tribunal set aside the impugned order and allowed the appeal, following the ratio of the relevant judgments and the CBEC Circular. The decision underscored the broad interpretation of "input service" to include sales promotion activities integrally connected with the business of manufacturing final products.
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