2016 (10) TMI 1205 - AT - Central Excise

CENVAT Credit - input service - Sales Commission - Held that - Reliance placed 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 where it was held that the definition of the input services includes services used in relation to sales promotion and these activities can rightly be described as sales promotion activities. Sales promotion activities undertaken at given point of time also aims at sales of goods which are to be manufactured and cleared on future. Any advertisement given as a long term impact cannot be treated as post-clearance activities and therefore sales promotion has been specifically included in the definition of input services - credit allowed - appeal dismissed - decided against Revenue.

Summary

Issues:
Denial of cenvat benefit on service tax paid on sales commission; Interpretation of Rule 2(l) of the Cenvat Credit Rules, 2004; Applicability of the explanation inserted in Rule 2(l) ibid on 3rd February, 2016; Benefit of retrospective application of the explanation; Reference to Tribunal's decision in M/s.Essar Steel India Ltd. vs. CCE & ST, Surat I; Justification for giving a purposive construction to legislation conferring benefits.

Analysis:
The case involved a dispute over the denial of cenvat benefit on service tax paid on sales commission by the Department, contending that the service did not fall under the definition of input service as per Rule 2(l) of the Cenvat Credit Rules, 2004. The Commissioner (Appeals) ruled in favor of the respondent, citing the explanation inserted in Rule 2(l) on 3rd February, 2016, which clarified that sales promotion includes services by way of sale of dutiable goods on a commission basis. The Commissioner considered this explanation as a beneficial grant with retrospective effect, relying on the Tribunal's decision in M/s.Essar Steel India Ltd. vs. CCE & ST, Surat I, which emphasized the purpose of explanations in clarifying doubtful points of law and supporting the dominant object of relevant rules.

The Tribunal's decision highlighted the significance of explanations in statutes, stating that they are generally meant to explain the meaning of specific provisions and can have retrospective effect to clarify doubtful points of law. It referred to the Hon'ble Supreme Court's stance in Vatika Township Pvt. Ltd. case, emphasizing that legislation conferring benefits without corresponding detriments should be given a purposive construction with retrospective effect. This approach is justified by the doctrine of fairness, especially when laws are enacted for the benefit of the community as a whole.

In analyzing the case, the presiding Member found that the issue was conclusively addressed by the Tribunal's decision and saw no flaw in the Commissioner's order. Consequently, the appeal filed by the Revenue was dismissed, affirming the applicability of the explanation in Rule 2(l) and the retrospective nature of the beneficial grant regarding sales promotion services. The judgment was dictated and pronounced in the open court, concluding the legal proceedings on the matter.