2017 (12) TMI 434 - AT - Central Excise

CENVAT credit - Service Tax paid on the commission paid towards promoting the sale of goods in foreign countries - Held that - 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. The said circular was endorsed by the Central Government vide N/N. 2/2016-CE (NT) dated 03/02/2016 - the said notification should be considered as declaratory in nature and effective retrospectively - the issue has been settled in the case of KEI Industries Ltd. Vs CCE 2017 (12) TMI 426 - CESTAT NEW DELHI - appeal dismissed - decided against Revenue.

Summary

Issues:
Appeals filed by Revenue against dropping of proceedings demanding Cenvat Credit on Service Tax paid for sales commission promoting goods in foreign countries.

Analysis:
The judgment involves two appeals filed by the Revenue against the dropping of proceedings by the Commissioner of Central Excise regarding the eligibility of Cenvat Credit on Service Tax paid for sales commission promoting goods in foreign countries. The Revenue contested the impugned orders, arguing that the Service Tax paid on sales commission was not eligible for Cenvat Credit. The Revenue relied on a decision by the Hon’ble Gujarat High Court in a specific case. On the other hand, the counsel for the assessee-Respondents cited various Tribunal decisions, including one involving KEI Industries Ltd., to support the eligibility of Cenvat Credit on Service Tax paid for sales commission. The Tribunal referred to a Circular by CBEC clarifying that Cenvat credit is admissible on services related to the sale of dutiable goods on a commission basis. The Tribunal also highlighted a notification by the Central Government endorsing the Circular. The Tribunal noted conflicting views by different High Courts on the matter, emphasizing the retrospective effectiveness of the notification and the explanatory nature of the inserted Explanation in Rule 2(l) of Rules, 2004. Based on previous decisions and the legal interpretations provided, the Tribunal upheld the impugned orders, dismissing the appeals filed by the Revenue and disposing of cross-objections accordingly.