2019 (1) TMI 1027 - AT - Central Excise

CENVAT Credit - input services - commission paid to their agents - Contradicting decisions - Held that - In view of the two contradictory decisions, the legislature took a call for explaining the meaning of sales promotion holding that Taking into circumstances under which the Explanation was inserted in Rule 2(l) of Rules, 2004 and consequence of the Explanation to extend the benefit to the assessee as per Board Circular, we hold that the Explanation inserted in Rule 2(l) of Rules, 2004 by Notification No. 2/2016-CX (N.T.) should be declaratory in nature and effective retrospectively. Commissioner(Appeals) has committed no error while allowing the assesees Appeal - appeal dismissed - decided against Revenue.

Summary

Issues:
- Eligibility of sales commission as input service for cenvat credit under Rule 2(l) of Cenvat Credit Rules, 2004.
- Retrospective effect of the amendment in Rule 2(l) of CCR 2004.
- Interpretation of relevant case laws and circulars regarding sales commission services.

Eligibility of Sales Commission as Input Service:
The case involved the eligibility of sales commission as an input service for cenvat credit under Rule 2(l) of Cenvat Credit Rules, 2004. The Department argued that the appellant was wrongly availing cenvat credit on sales commission paid to agents, which was not eligible as per the definition of input service. The Department relied on a previous decision, while the appellant cited conflicting decisions from other High Courts. The Tribunal analyzed Rule 2(l) and concluded that the impugned services for promotion of the appellant's products were indeed eligible for consideration as an input service for cenvat credit. The Tribunal referenced a case from the Hon'ble High Court of Punjab & Haryana to support this conclusion, emphasizing that sales promotion activities fall under the definition of input services.

Retrospective Effect of Amendment in Rule 2(l) of CCR 2004:
Another key issue was the retrospective effect of the amendment in Rule 2(l) of CCR 2004. The Department argued that the amendment, effective from February 2016, could not be applied retrospectively to the period in dispute (April 2011 to March 2015). The Department contended that the Commissioner(Appeals) erred in giving retrospective effect to the amendment. However, the appellant highlighted a Tribunal decision that clarified the retrospective nature of the amendment, supporting the Commissioner(Appeals)' decision. The Tribunal further discussed previous orders and circulars to establish the retrospective applicability of the clarification regarding sales promotion services.

Interpretation of Relevant Case Laws and Circulars:
The Tribunal extensively analyzed various case laws, including decisions from different High Courts and Tribunal orders, to interpret the eligibility of sales commission services as input services for cenvat credit. The Tribunal compared conflicting views from different courts and emphasized the importance of a Board Circular and a subsequent Notification clarifying the admissibility of cenvat credit on sales promotion services involving sales of dutiable goods on a commission basis. The Tribunal ultimately upheld the decision of the Commissioner(Appeals) and dismissed the Department's appeal, citing consistency with previous Tribunal decisions and the clarifications provided in relevant circulars and notifications.

In conclusion, the Tribunal ruled in favor of the appellant, affirming the eligibility of sales commission as an input service for cenvat credit and supporting the retrospective application of the clarification regarding sales promotion services. The decision was based on a thorough analysis of Rule 2(l) of CCR 2004, relevant case laws, and circulars, ensuring consistency with previous Tribunal decisions on similar matters.