2016 (6) TMI 1305 - HC - Service Tax

CENVAT Credit sale promotion activities - Beneficial amendment to Rule 2(l) vide notification no. 2/2016 CE(NT) dated 3.2.2016 is retrospective or prospective - the decision in the case of M/S ESSAR STEEL INDIA LTD. VERSUS COMMISSIONER OF C. EX. & SERVICE TAX SURAT-I 2016 (4) TMI 232 - CESTAT AHMEDABAD . The appeal is ADMITTED for consideration of various substantial questions of law raised.

Summary

Issues involved:
Interpretation of Cenvat Credit Rules, 2004 regarding services provided by marketing agents.

Issue A:
The first issue involves whether the Tribunal erred in categorizing services by marketing agents as "sales promotion" instead of sales commission. The Tribunal's decision is being challenged based on the interpretation of Rule 2(l) of the Cenvat Credit Rules, 2004.

Issue B:
The second issue questions whether the Tribunal incorrectly classified the services provided by agents as sales promotion agreements rather than agency agreements aimed at market feedback and client development. The dispute centers on the nature of the agreements between the respondent and its agents.

Issue C:
The third issue pertains to the Tribunal's interpretation of the retrospective effect of an explanation inserted in Rule 2(l) of the Cenvat Credit Rules, 2004 by Notification No. 2/2016-C.E. (N.T.). The Tribunal's decision regarding the declaratory nature and retrospective application of the explanation is under scrutiny.

Issue D:
The final issue questions the Tribunal's decision on the permissibility of the respondent availing Cenvat credit for input services received from its agents. The dispute revolves around whether the demand of duty, interest, and penalty imposed by the adjudicating authority is justified or should be set aside based on the legality of the Cenvat credit availed.

In the judgment delivered by the High Court, the draft amendment was allowed, and the appeal was admitted for consideration of the substantial questions of law outlined. The issues raised in the appeal primarily focus on the interpretation and application of the Cenvat Credit Rules, 2004 concerning the services provided by marketing agents. The Court will review whether the Tribunal erred in categorizing the services as "sales promotion" instead of sales commission, the classification of agreements between the respondent and its agents, the retrospective effect of an explanation in the Rules, and the permissibility of availing Cenvat credit for input services. The decision on these issues will have implications on the demand of duty, interest, and penalty imposed by the adjudicating authority.