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2018 (7) TMI 168 - AT - Central ExciseCENVAT credit - input services - commission paid to the sales/commission agents - whether the commission paid to the sales/commission agents is related to promotion of any activity specified in the inclusive part of the definition of input service provided under Rule 2 (l) of the Cenvat Credit Rules, 2004? - Held that - Whether the explanation added in Rule 2 (l) of Cenvat Credit Rules, 2004 vide notification dated 03/02/2016 has retrospective effect or not, has come before this Tribunal in the matter of Essar Steel India Ltd. vs. CCE & ST, Surat I 2016 (4) TMI 232 - CESTAT AHMEDABAD , where it was held that the explanation inserted in Rule 2 (l) of Rules 2004 by N/N. 2/2016-CX (NT) should be declaratory in nature and effective retrospectively. Explanation to Rule 2 (l) of Rules 2004 says it in clear terms that there is no bar on availment of Cenvat credit on sales promotion service by way of sale of dutiable goods on commission basis. Appeal dismissed - decided against Revenue.
Issues Involved:
1. Wrongful availing of Cenvat credit on ineligible input service. 2. Recovery of wrongly availed Cenvat credit. 3. Imposition of interest on wrongly availed Cenvat credit. 4. Imposition of penalty under relevant rules and sections. Issue-Wise Detailed Analysis: 1. Wrongful Availing of Cenvat Credit on Ineligible Input Service: The respondent/assessee engaged in manufacturing Ball Bearings was issued a show cause notice alleging wrongful availing of Cenvat credit amounting to ?15,74,528/- on services rendered by sales/commission agents. The Adjudicating Authority dropped the proceedings, stating that the services provided by the sales agents were indeed for sales promotion activities, thus qualifying as input services under the Cenvat Credit Rules, 2004. The Commissioner (Appeals) upheld this view, referencing the clarification dated 29/04/2011 and Notification No. 02/2016-CE (NT), which included sales promotion services within the definition of input services. 2. Recovery of Wrongly Availed Cenvat Credit: The core issue was whether the commission paid to sales/commission agents qualified as input services under Rule 2 (l) of the Cenvat Credit Rules, 2004. The Tribunal referred to the amendment in Rule 2 (l) via Notification No. 2/2016-CE (NT) which explicitly included sales promotion services by way of sale of dutiable goods on commission basis. The Tribunal consistently held that this amendment was declaratory and retrospective, thus validating the respondent's availing of Cenvat credit on such services. 3. Imposition of Interest on Wrongly Availed Cenvat Credit: The Department argued that the amendment should only apply prospectively from its publication date. However, the Tribunal, referencing multiple judgments including Essar Steel India Ltd. and Mangalam Cement Ltd., held that the explanation in Rule 2 (l) was retrospective. Therefore, the availing of Cenvat credit by the respondent was legitimate, negating the need for recovery of interest. 4. Imposition of Penalty Under Relevant Rules and Sections: Given the Tribunal's stance that the explanation in Rule 2 (l) was retrospective and the respondent's actions were in line with the clarified rules, the imposition of penalties under Rule 15 (1) of the Cenvat Credit Rules, 2004 read with Section 11AC (1) (a) of the Central Excise Act, 1944 was deemed unwarranted. Conclusion: The Tribunal dismissed the Department's appeal, affirming that the explanation inserted in Rule 2 (l) by Notification No. 2/2016-CE (NT) was declaratory and retrospective. This consistent interpretation across various cases established that the respondent/assessee was entitled to avail Cenvat credit for sales promotion services rendered by sales/commission agents. The appeal by the Department was thus rejected, and the respondent's actions were validated.
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