2017 (10) TMI 1651 - AT - Central Excise

CENVAT Credit - input service or not - For promoting the sales the appellant has paid the sales commission to its agent - HELD THAT - It appears that the issue has came up before the Tribunal as M/S ESSAR STEEL INDIA LTD. VERSUS COMMISSIONER OF C. EX. SERVICE TAX, SURAT-I 2016 (4) TMI 232 - CESTAT AHMEDABAD as well as in the case of M/S MANGALAM CEMENT LTD., M/S J.K. LAKSHMI CEMENT LTD, M/S K.E.I. INDUSTRIES LTD VERSUS CCE, UDAIPUR 2017 (12) TMI 426 - CESTAT NEW DELHI wherein it was observed that With regard to availment of Cenvat credit on the commission paid for sale promotion activities, the CBEC vide Circular No. 943/4/2011-CX. Dated 29/04/2011 has clarified that Cenvat credit is admissible on the services of the sale of the dutiable goods on commission basis. There are no reason to sustain the impugned order. Same is set aside - appeal allowed.

Summary

Issues:
Appeal against disallowance of sales commission paid for promoting sales.

Analysis:
The appeal was filed against the order dated 7.10.2016 disallowing the sales commission paid by the appellant to its agent for promoting sales of 'Ghadi' brand washing cake and powder. The period of dispute was from June, 2013 to January, 2015. The Tribunal considered the issue in light of previous judgments and circulars. The Tribunal referred to the case of M/s. Essar Steel India Ltd. vs. CCE, Surat and M/s. Mangalam Cement Ltd. vs. CCE Udaipur, where it was clarified that Cenvat credit is admissible on commission paid for sale promotion activities. The circular dated 29/04/2011 and Notification No. 2/2016-CE (NT) dated 03/02/2016 endorsed by the Central Government were also considered. The Tribunal held that the notification should be considered declaratory in nature and effective retrospectively.

The Tribunal noted the conflicting views of different High Courts on the issue, but relied on the circular and notification to support its decision. It emphasized that there is no bar on availing Cenvat credit on sales promotion services by way of sale of dutiable goods on commission basis. By inserting an Explanation in Rule 2(l) of Rules, 2004, the legislature clarified that sales promotion includes services by way of sale of dutiable goods on commission basis. The Tribunal concluded that the Explanation should be considered declaratory and effective retrospectively, in favor of the assessee.

Based on the settled position of law and previous orders, the Tribunal found no merits in the impugned orders disallowing the sales commission. Consequently, the Tribunal allowed the appeals in favor of the appellants. The impugned order was set aside, and the appeal filed by the appellant was allowed.