2019 (7) TMI 202 - AT - Central Excise

CENVAT Credit - input services - tax paid on commissions to Agents who sell the goods and undertake the guarantee of payment - input service invoices issued by their office as ISD prior to 01.03.2006, when the registered address was different. Tax paid on commissions to Agents who sell the goods and undertake the guarantee of payment - HELD THAT - A plain reading of the scope of commission agent and the Del Credere Agent, it can be inferred that the Del Credere Agent is the one who guarantees payment from the customer s for the sale and in the event of default in such payment, makes good of the same to the principal - In the present case, besides, the activity of sales promotion, the agents have also undertaken to act as a Del Credere Agent. Therefore, merely because of the fact they were also act as Del Credere Agent, the activities/services provided by such agents in promotion of the sale of the product cannot in any manner be diluted - therefore the activities/services rendered by the agents through the agency agreement reproduced above clearly indicate that the services provided by them are in the nature of sales promotion activities in addition to the service as Del Credere Agent, hence, fall within the scope of definition of input service as prescribed under Rule 2(l) of the Cenvat Credit Rules, 2004 - the amount of service tax paid to these commission agents have been rightly held by the Commissioner is in the nature of sales promotion, accordingly, eligible to cenvat credit - credit allowed. Whether the appellant-assessee has correctly availed cenvat credit on the input service invoices issued by their office as ISD prior to 01.03.2006, when the registered address was different? - HELD THAT - At the relevant time, their Satellite office was a unit included in the list of units for distribution of credit submitted to the department. However, later, due to shifting of the business operations to Satellite office, change of address in the ISD Registration Certificate was requested and allowed from 1st March 2006 - credit should not be denied merely for procedural irregularities - credit allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Eligibility of Cenvat credit on service tax paid on commissions to Del Credere agents.
2. Correctness of availing Cenvat credit on input service invoices issued by the office as ISD prior to 01.03.2006, when the registered address was different.

Issue-wise Detailed Analysis:

1. Eligibility of Cenvat credit on service tax paid on commissions to Del Credere agents:

The appellant, M/s. Reliance Industries Ltd., availed Cenvat credit on service tax paid on commissions to Del Credere agents, which was contested by the Revenue. The agents were appointed to promote the sale of products and were responsible for collecting payments from customers, guaranteeing payment in case of default. The primary function of these agents was sales promotion, with the collection of payments being incidental.

The relevant clauses of the agency agreement were scrutinized:
- Clause 3: Agents promote the sale of products.
- Clause 7: Agents collect payments from customers.
- Clause 8: Agents indemnify the appellant against defaulted payments.
- Clause 10: Agents provide market and financial information.

The Tribunal concluded that the agents' services were primarily for sales promotion, falling within the scope of 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004. The definition of 'Business Auxiliary Service' includes commission agents, who may guarantee payment, thus supporting the appellant's claim. The Tribunal referenced the case of Essar Steel India Ltd. vs. CCE and Lanco Industries Ltd. vs. CCE, which upheld that commissions paid to agents for sales promotion qualify as input services.

2. Correctness of availing Cenvat credit on input service invoices issued by the office as ISD prior to 01.03.2006, when the registered address was different:

The appellant initially registered their office at Shantikunj, Ahmedabad, as an ISD. Later, the business operations shifted to Satellite office, and the address change was requested and allowed from 1st March 2006. The Commissioner denied credit on input invoices issued before this date, arguing the Satellite office was not registered as an ISD.

The Tribunal found this denial unsustainable, citing the Gujarat High Court's judgment in CCE vs. Dashion Ltd., which held that non-registration as an ISD does not automatically disqualify credit. The Tribunal emphasized that procedural irregularities should not lead to denial of substantive benefits when full records are maintained and verifiable.

Conclusion:

The Tribunal allowed the appeal by the assessee, confirming the eligibility of Cenvat credit on service tax paid to Del Credere agents and setting aside the denial of credit on invoices issued prior to 01.03.2006. The Revenue's appeal was rejected. The order was pronounced in open court on 21.06.2019.