2017 (11) TMI 818 - AT - Central Excise

100% EOU - CENVAT credit - commission agreement for the services of sales promotion and marketing of the products in abroad - reverse charge mechanism - Held that - from the reading of the marketing representation agreement between the respondent and the upcountry entity, clearly spells out the responsibilities of the upcountry entity which includes assisting the respondent in various activities and manage regarding marketing and sales objectives to be achieved. This would mean that the upcountry entity has to also do the promotional activities in respect of the goods manufactured and exported by the respondent. The first appellate authority has correctly recorded the factual matrix in the matter and held that CENVAT credit is available to respondent herein of the service tax paid under reverse charge mechanism. Appeal dismissed - decided against Revenue.

Summary

Issues:
- Availment of CENVAT credit by a 100% EOU for service tax paid under reverse charge mechanism for sales promotion and marketing services.

Analysis:
The appeal was filed by the Revenue against the Order-in-Appeal, focusing on the issue of CENVAT credit availed by the respondent, a 100% EOU, for service tax paid under reverse charge mechanism for sales promotion and marketing services. The respondent had appointed an upcountry entity for sales promotion and marketing activities, paying them an amount and availing CENVAT credit. The adjudicating authority rejected the refund claim, citing that the payment was for sales commission, making it ineligible for credit based on precedents like Cadila Healthcare Ltd. and Dynamic Industries Ltd. However, the first appellate authority analyzed the agreement between the parties and concluded that the payments were for sales promotion and marketing services related to the exported goods, allowing the CENVAT credit.

In the grounds of appeal, the Revenue argued that the payments were commissions and not sales promotion, relying on previous judgments. The respondent's counsel contended that the agreement clearly showed the upcountry entity's role in marketing and sales promotion of the respondent's products. Referring to precedents like Liebherr Machine Tools India (P) Ltd. and Novozymes South Asia Pvt. Ltd., it was argued that CENVAT credit should be allowed on such service tax payments.

Upon careful consideration, the Tribunal found that the marketing representation agreement detailed the responsibilities of the upcountry entity, including assisting in marketing and sales objectives. This indicated that the upcountry entity was involved in promotional activities for the goods manufactured and exported by the respondent. The Tribunal upheld the first appellate authority's decision, stating that the CENVAT credit was rightfully available to the respondent for the service tax paid under the reverse charge mechanism. The impugned order was deemed correct and legal, aligning with precedents cited in various cases.

In conclusion, the Tribunal upheld the impugned order, rejecting the appeals filed by the Revenue and affirming the availability of CENVAT credit for the service tax paid on sales promotion and marketing services under the reverse charge mechanism.