2016 (8) TMI 434 - AT - Central Excise

Cenvat credit - entitlement - Whether the Commission Agent Services would be classifiable as Business Auxiliary Service as per Department or Sales Promotion service as per appellant - Held that - the services in question cannot be called commission agency services for sales. When all the activities of M/s. Francis Klein & Co. Pvt. Ltd., are considered, it is clear that they are engaged in promotion of sales for the products manufactured by the appellants. Here the agreement says that appellants would provide them complete catalogue instruction books, circulars for promoting sales. It also says that the appellants will execute orders promptly placed by said Francis Klein & Co. Pvt. Ltd. We cannot say that said M/s. Francis Klein & Co. Pvt. Ltd. are only primarily concerned with sales not with the sales promotion. It is to be noted that without any sales promotion there cannot be any final sale. Hence, the input services in question are in the category of Sales Promotion, which would be covered by definition of input services given in Rule 2(l) of Cenvat Credit Rules 2004. Therefore the appellants would be entitled to the cenvat credit for the service tax paid for these input services in question. - Decided in favour of appellant

Summary

Issues:
1. Disallowance of cenvat credit for input services categorized as Business Auxiliary Service.
2. Determination of input services as Sales Promotion or Commission Agent Services.
3. Entitlement to cenvat credit under Rule 2(l) of Cenvat Credit Rules, 2004.

Analysis:
1. The appellants were denied cenvat credit by the Commissioner for input services categorized as Business Auxiliary Service, resulting in disallowance of a significant amount along with penalties. The appellants, a machinery manufacturing company, contested this decision before the Tribunal seeking relief from the order.

2. The main argument presented by the appellants was that the input services in question were related to Sales Promotion, not Commission Agent Services. They emphasized the nature of their business, which catered to automobile industries, and highlighted an agreement with a company for sales promotion activities. The appellants relied on legal precedents and decisions to support their claim, asserting that the services qualified as input services under Rule 2(l) of the Cenvat Credit Rules, 2004.

3. The Revenue, represented by the learned AR, contended that the input services were more akin to Commission Agent Services rather than Sales Promotion. Referring to a specific court decision, the Revenue argued that payments made to agents for sales activities did not fall under the definition of input services. The focus was on the role of the company with whom the agreement was made, suggesting they were primarily involved in sales rather than sales promotion activities.

4. After a thorough examination of the facts, agreements, and arguments from both sides, the Tribunal concluded that the input services were indeed in the category of Sales Promotion, aligning with the definition under Rule 2(l) of the Cenvat Credit Rules, 2004. The Tribunal emphasized the importance of sales promotion for final sales and highlighted the activities undertaken by the company with whom the appellants had engaged for promotion. By setting aside the Commissioner's order, the Tribunal ruled in favor of the appellants, allowing them to claim cenvat credit for the service tax paid on the input services in question.