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2019 (3) TMI 1992 - AT - Service TaxCENVAT Credit - input services - sales commission paid to their sale agents - difference of opinion of different courts on the issue - HELD THAT - The Hon ble High Court Gujarat in ASTIK DYESTUFF PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS 2014 (1) TMI 776 - GUJARAT HIGH COURT has relied upon COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD II VERSUS M/S CADILA HEALTH CARE LTD. 2013 (1) TMI 304 - GUJARAT HIGH COURT however Hon ble High Court of Punjab and Haryana in the case COMMISSIONER OF CENTRAL EXCISE, LUDHIANA VERSUS AMBIKA OVERSEAS 2011 (7) TMI 980 - PUNJAB HARYANA HIGH COURT had given a contradictory decision - It is thereafter that the matter was referred to Hon ble Supreme Court. Subsequent thereto there has been a CBEC Circular No. 934/4/2011 dated 29.04.2011 vide which the scope of sales promotion activities as mentioned in explanation to Rule 2(l) of Cenvat Credit Rules, 2004 (as was inserted vide Notification No. 2/2016 dated 03.02.2016) was considered. The said clarificatory Circular was issued by the Department with a view to resolve the confusion prevalent due to the different views of the different High Courts - It was clarified therein that an explanation inserted in a Section/ Rule is generally to explain the meaning and intendments of the said Section/ Rule. Sometimes when the explanation is inserted to clarify a doubtful point of law it would be effectively retrospective in nature. While relying upon the said Circular, this Tribunal in M/S ESSAR STEEL INDIA LTD. VERSUS COMMISSIONER OF C. EX. SERVICE TAX, SURAT-I 2016 (4) TMI 232 - CESTAT AHMEDABAD case has held the Commission paid to the agents is a sales promotion activity. Keeping in view the same and the fact that the matter is still subjudice before the Apex Court, due to the contrary decisions from two different High Courts, but that the Department has subsequently tried to resolve the confusion, Order is hereby set aside - Appeal dismissed.
Issues:
- Availment of cenvat credit on service tax paid on sales commission - Interpretation of sales promotion activities as input services - Contradictory decisions of High Courts - Applicability of CBEC Circular on sales promotion activities Analysis: 1. The case involved the respondent, engaged in manufacturing excisable goods, availing cenvat credit on service tax paid on sales commission to their agents. The Department contended that sales commission services were not input services, leading to a proposal for recovery of cenvat credit. The Assistant Commissioner's order confirmed this proposal, prompting the respondent to appeal. The Commissioner (Appeals) initially allowed the appeal, but the Department appealed against this decision, citing a High Court judgment denying cenvat credit for sales commission services. 2. The respondent argued that a subsequent clarification recognized sales promotion, including service through the sale of dutiable goods on a commission basis. They referenced a decision involving Essar Steel India Ltd. to support their stance. The respondent urged the dismissal of the appeal based on this clarification and case law. 3. Upon reviewing the arguments and case law, the Tribunal noted the conflicting decisions of different High Courts on the issue. The Tribunal highlighted the Gujarat High Court's reliance on a previous case and the contradictory decision by the Punjab and Haryana High Court, leading to a reference to the Supreme Court. Additionally, a CBEC Circular clarified the scope of sales promotion activities as input services, aiming to resolve the confusion arising from divergent High Court opinions. 4. The Tribunal emphasized that explanatory circulars are generally retrospective when clarifying doubtful legal points. Citing the CBEC Circular and a previous case involving Essar Steel India Ltd., the Tribunal concluded that commissions paid to agents constituted sales promotion activities. Considering the conflicting High Court decisions and the Department's efforts to address the confusion, the Tribunal set aside the earlier order, dismissed the appeal, and granted consequential benefits to the respondent. The cross-appeal was also disposed of accordingly, pending the Supreme Court's final decision on the matter.
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