2015 (10) TMI 51 - AT - Service Tax

Denial of CENVAT Credit - whether appellant is eligible for the benefit of Cenvat credit of service tax paid on sales commission paid by them to their agents - Held that - Even though department has not filed appeal, the fact remains that even if appeals are filed by the department, Commissioner (Appeals) has held in favour of the appellant. Further I also find considerable force in the argument that the lower authorities have travelled beyond the show cause notice while deciding the issue. In the show cause notice the proposal was to deny the Cenvat credit on the ground that the said service was not an input service used directly or indirectly in the manufacture of final products. However the lower authorities have taken a view that the activity undertaken by the commission agents was only sales and not sales promotion. In my opinion by doing so the lower authorities have travelled beyond the show cause notice and reliance of the learned CA on the decision in the case of Salasar Copper v. CCE, Vapi reported in 2012 (6) TMI 25 - CESTAT, AHMEDABAD is appropriate. - according to the definition of input service , the words up to the place of removal has been used only in respect of few input services in the definition i.e. in respect of transportation and storage of the goods. Therefore this restrictive clause cannot be applied to all the cases. Therefore if the service tax has been paid treating the same as Business Auxiliary Service the assessee cannot be denied the benefit of service tax credit which has been paid by the service provider. - Decided in favour of assessee.

Summary

Issues:
1. Eligibility of appellant for Cenvat credit of service tax paid on sales commission.
2. Interpretation of input service definition regarding sales promotion and activities of commission agents.

Analysis:
1. The case revolved around the eligibility of the appellant for the benefit of Cenvat credit of service tax paid on sales commission to agents. The issue arose when a show cause notice was issued proposing to deny the credit on the grounds that the service was not considered an input service. The lower authorities contended that the activity by agents did not constitute sales promotion, thus rejecting the credit claim.

2. The appellant's representative argued that for subsequent periods, the Commissioner (Appeals) had allowed the credit in similar cases, indicating consistency in benefit extension. Additionally, a circular by the Board clarified that Cenvat credit on sales commission by commission agents was permissible. On the contrary, the respondent relied on a High Court decision stating that commission agents' activities did not qualify as sales promotion under the input service definition.

3. The Tribunal analyzed the submissions and referred to the Board's circular supporting the appellant's claim. It noted that the lower authorities had exceeded the show cause notice's scope by delving into the nature of activities by commission agents. The Tribunal emphasized that the definition of 'input service' did not restrict credit based on the place of removal, except for specific services like transportation and storage, hence supporting the appellant's position.

4. Ultimately, the Tribunal found merit in the appellant's appeal, holding that the Cenvat credit for sales commission paid to agents was admissible. The decision was based on the interpretation of relevant legal provisions and precedents cited during the proceedings. The judgment concluded in favor of the appellant, granting them the benefit of the Cenvat credit on the service tax paid for sales commission.

Conclusion:
The judgment by the Appellate Tribunal CESTAT Bangalore clarified the eligibility of the appellant for Cenvat credit on service tax paid for sales commission to agents. The decision highlighted the importance of interpreting input service definitions and ensuring consistency in applying legal provisions. The appellant's appeal was successful, emphasizing the admissibility of the Cenvat credit based on the specific circumstances and legal framework presented in the case.