2017 (11) TMI 400 - AT - Service Tax

CENVAT credit - input services - sales commission paid for sale of their goods - Held that - Clause 2 of the Memorandum of Understanding is very clear and clearly shows that what is undertaken by the IOCL is in reality a sales promotion activity and therefore the appellants are entitled to take Cenvat credit of the input service i.e. sales promotion activity - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against rejection of Cenvat credit on sales commission services
- Interpretation of 'input service' under Cenvat Credit Rules, 2004
- Applicability of sales promotion activities for availing Cenvat credit

Analysis:
The appeal in this case challenges the rejection of Cenvat credit on sales commission services by the Commissioner (Appeals). The appellant, a manufacturer of LPG Stove & its parts, availed input service credit for service tax on sales commission paid to IOCL for sale of their goods. The Department contended that sales commission services are not eligible for Cenvat credit as per the definition of 'input service' under Rule 2(l) and Rule 3(1)(ix) of Cenvat Credit Rules, 2004. A show cause notice was issued, leading to the confirmation of demand along with interest and penalty by the adjudicating authority.

During the appeal, the appellant argued that the impugned order misinterpreted the definition of 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004. They claimed that the commission paid to IOCL was for promoting the sales of their product, which falls under the definition of 'input service'. The appellant cited the judgments of the Hon'ble Supreme Court and other cases to support their argument. However, no representation was made on behalf of the appellant during the proceedings.

The learned AR reiterated the findings of the impugned order, maintaining the stance taken by the Department. Upon reviewing the material on record, the Member (J) found that the activities undertaken by the appellant with IOCL constituted sales promotion, making them eligible for Cenvat credit on input service related to sales promotion activities. The Memorandum of Understanding between the parties clarified the nature of the activities as sales promotion, entitling the appellant to avail Cenvat credit. Consequently, the appeal was allowed, setting aside the impugned order with any consequential relief.

In conclusion, the judgment highlights the importance of correctly interpreting the definition of 'input service' under the Cenvat Credit Rules, 2004, and the eligibility of sales promotion activities for availing Cenvat credit. The decision emphasizes the need for clarity in agreements and documentation to support claims for Cenvat credit on specific services.