2019 (10) TMI 685 - AT - Central Excise

CENVAT Credit - input services - sales commission given for sales promotion - extended period of limitation - HELD THAT - The sales promotion relates to activities that stimulated sales achieved through contacts, advertisements, discounts, exhibition or trade show, commission, give away, merchandisation, special offer and similar activities that would act as incentive to get people to buy a product - This being the meaning of sales promotion, it is imperative to have a look at the agreement Exhibit-B to find out if the activities of appellant sales promotion agency would amount to pure sale or sales promotion. Extended period of limitation - HELD THAT - The consistent judicial findings are available including the decisions in M/S BEDMUTHA INDUSTRIES LTD. VERSUS CCE ST, NASHIK 2019 (2) TMI 408 - CESTAT MUMBAI , M/S ROSA SUGAR WORKS VERSUS CCE. ST. -LUCKNOW 2015 (5) TMI 381 - CESTAT NEW DELHI and M/S. BIRLA CORPORATION LTD. VERSUS CCE, LUCKNOW 2014 (6) TMI 385 - CESTAT NEW DELHI , to the effect that audit report cannot form the basis for invocation of extended period. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Inadmissibility of Cenvat Credit on service tax paid on sales commission.

Analysis:
The appellant, engaged in manufacturing excisable goods, availed Cenvat Credit on service tax paid on sales commission to commission agents. An audit revealed the wrongful availing of credit, leading to a demand of ?11,72,004/- along with interest and penalty. The Commissioner (Appeals) upheld the decision, prompting the appeal.

During the appeal, the appellant argued that based on a judgment of the Gujarat High Court, the Commissioner erred in categorizing the appellant as a pure commission agent. The appellant contended that they were involved in sales promotion activities as per the contract terms, justifying the credit availed. Reference was made to CBEC Circulars and clarifications supporting the admissibility of such credits.

The respondent, the Department's Authorized Representative, supported the Commissioner's decision, emphasizing that the payment was commission on sales as per the agreement, with no evidence of sales promotion activities presented by the appellant.

The Tribunal analyzed the definitions of "sales promotion" and "commission" from various sources, concluding that sales promotion involves activities stimulating sales through various means, distinct from commission paid to agents. Examining the agreement terms, the Tribunal found that the appellant undertook sales promotion activities beyond mere commission, supported by evidence and contrary to the lower authority's findings.

Considering the CBEC Circular and consistent judicial precedents, the Tribunal held in favor of the appellant, allowing the appeal and setting aside the Commissioner's order. The Tribunal emphasized that audit reports alone cannot invoke the extended period for recovery.

In conclusion, the Tribunal allowed the appeal, setting aside the Commissioner's order, and pronounced the judgment on 18-10-2019.