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2019 (7) TMI 1246 - AT - Service TaxCENVAT Credit - sales commission paid to their sale agents - the services provided by the commission agents were denied to be the input service - contradictory decisions - matter sub-judice before Apex Court - HELD THAT - Hon ble High Court Gujarat in ASTIK DYESTUFF PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS 2014 (1) TMI 776 - GUJARAT HIGH COURT has relied upon C.C.E., Ahmedabad Vs. Cadila Healthcare Ltd. 2013 (1) TMI 304 - GUJARAT HIGH COURT however Hon ble High Court of Punjab and Haryana in the case COMMISSIONER OF CENTRAL EXCISE, LUDHIANA VERSUS AMBIKA OVERSEAS 2011 (7) TMI 980 - PUNJAB HARYANA HIGH COURT had given a contradictory decision. It is thereafter that the matter was referred to Hon ble Supreme Court. Subsequent thereto there has been a CBEC Circular No. 934/4/2011 dated 29.04.2011 vide which the sales promotion activities as mentioned in explanation to Rule 2(l) of Cenvat Credit Rules, 2004 (as was inserted vide Notification No. 2/2016 dated 03.02.2016) was considered. The said Circular was passed by the Department with a view to resolve the confusion prevalent due to the different views of the above said High Courts. It was clarified therein that an explanation inserted in a Section/ Rule is generally to explain the meaning and intendenments of the said Section/ Rule. Sometimes when the explanation is inserted to clarify a doubtful point of law it would be effectively retrospective in nature. The fact that the matter is still subjudiced before Hon ble Apex Court due to the contrary decisions from two different High Courts but that the Department has subsequently tried to resolve the confusion, Order is hereby set aside - Appeal dismissed.
Issues:
1. Availment of cenvat credit on service tax paid for sales commission. 2. Interpretation of sales commission as input service for cenvat credit eligibility. 3. Conflict between High Court decisions on sales promotion activities. 4. Impact of CBEC Circular on resolving conflicting views. Issue 1: Availment of cenvat credit on service tax paid for sales commission The appellants were discharging Central Excise duty on goods and availing cenvat credit on input services. The Department alleged that the appellants availed cenvat credit on service tax paid for sales commission to their agents, which the Department considered ineligible as an input service. A show cause notice was issued for recovery of the cenvat credit along with interest and penalty. The Assistant Commissioner confirmed the proposal, leading to an appeal by the appellants. The Commissioner(Appeals) allowed the appeal, but a subsequent review by the Department prompted an appeal before the Tribunal. Issue 2: Interpretation of sales commission as input service for cenvat credit eligibility The Department argued that sales commission services were not eligible as input services based on a decision by the High Court of Gujarat. The Department highlighted that an appeal to the Supreme Court against the Gujarat High Court decision did not result in a stay. In response, it was argued that a clarification post the Gujarat High Court decision recognized sales promotion, including commission-based sales of dutiable goods as a service. Reference was made to a decision involving Essar Steel India Ltd. to support the dismissal of the appeal. Issue 3: Conflict between High Court decisions on sales promotion activities The Tribunal noted conflicting decisions by different High Courts, with the High Court of Gujarat and Punjab & Haryana holding contradictory views on the matter. This led to a reference to the Supreme Court for resolution. Subsequently, a CBEC Circular was issued to address the confusion arising from the divergent opinions. The Circular aimed to clarify that commission paid to agents constituted a sales promotion activity, with retrospective effect to resolve doubts in the law. Issue 4: Impact of CBEC Circular on resolving conflicting views The Tribunal, considering the CBEC Circular and the conflicting High Court decisions, held that the commission paid to agents qualified as a sales promotion activity. Despite the ongoing dispute in the Apex Court due to the differing High Court judgments, the Tribunal acknowledged the Department's efforts to resolve the confusion. Consequently, the Tribunal set aside the order and dismissed the appeal, emphasizing the retrospective effect of the Circular in clarifying the eligibility of sales commission for cenvat credit.
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