9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (11) TMI 893 - AT - Central ExciseCENVAT Credit - input services - sales commission paid to sister concern - outward transportation from factory to the buyers premises for the period from April 2008 to April 2010 - HELD THAT - As per clause (3) of the Agreement entered into between the appellant and FMGIL, FMGIL promotes sale of products of the appellant by doing various activities including promotion and marketing of the products of the appellant, seeking orders, assistance in sale of products, maintaining good relations with customers, providing consultation and advice in relation to the above, receiving orders from customers in relation to the products, notifying the customers/prospective customers of all the terms and conditions of sale as determined by the appellants. Further, the input service as defined under Rule 2(l) of CENVAT Credit Rules, 2004 explicitly includes activity of sales promotion and the explanation to Rule 2(l) of CENVAT Credit Rules, 2004 inserted by Notification No.2/2016- CE(NT) dated 3.2.2016 holding that sales promotion includes services by way of sale of dutiable goods on commission basis - also, this explanation added by way of amendment is declaratory in nature and is applicable retrospectively. The Board vide Circular No.96/85/2015-CX dated 7.2.2015 has clarified that decision in the case of COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD II VERSUS M/S CADILA HEALTH CARE LTD. 2013 (1) TMI 304 - GUJARAT HIGH COURT applies in case where the agent is undertaking only sales and no sales promotion. Whereas in the present case, it is clearly evident from various terms and conditions contained in clause (3) of the Agreement that M/s. FMGIL undertakes the activity of sales promotion. Hence, we hold that the decision in the case of Cadila Healthcare Ltd. is not applicable in the present case. This issue is no more res integra and it has been consistently held that sales commission fall under definition of input service . By following the ratio of the above said decisions, the denial of CENVAT Credit on sales commission is not sustainable in law. Time Limitation - CENVAT credit on outward transportation from factory to the customers premises - HELD THAT - On the point of limitation, the Division Bench of this Tribunal in the case of M/S SANGHI INDUSTRIES LTD. VERSUS C.C.E. KUTCH (GANDHIDHAM) 2019 (2) TMI 1488 - CESTAT AHMEDABAD , the Division Bench has dealt with the issue of limitation and has held that the outward GTA was the matter under litigation and for that reason the Government has to come out with clarification thereafter the matter was subject to various litigation before Tribunal, Hon ble High Courts and Hon ble Supreme Court, therefore no malafide intention can be attributed to the appellant, therefore, wherever the demand is for extended period, the same will also not be sustainable on the ground of time bar also. Appeal disposed off.
Issues Involved:
1. Denial of CENVAT credit on sales commission paid to sister concern. 2. Denial of CENVAT credit on service tax paid on outward transportation from factory to buyer’s premises. 3. Imposition of penalties. 4. Application of extended period of limitation. Issue-wise Detailed Analysis: 1. Denial of CENVAT Credit on Sales Commission Paid to Sister Concern: The appellants argued that the sales commission paid to their sister concern for promoting and marketing their products qualifies as 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004. The definition of 'input service' explicitly includes sales promotion activities. The Tribunal noted that the Marketing Agency Agreement between the appellant and their sister concern involved various promotional activities, which fall under the definition of 'input service'. The Tribunal also referred to the explanation added by Notification No.2/2016-CE(NT) dated 3.2.2016, which clarified that sales promotion includes services by way of sale of dutiable goods on commission basis. This amendment was deemed declaratory and applicable retrospectively. Previous Tribunal decisions and Board Circular No.96/85/2015-CX-I dated 7.12.2015 supported this interpretation. Consequently, the Tribunal held that the denial of CENVAT credit on sales commission was not sustainable. 2. Denial of CENVAT Credit on Service Tax Paid on Outward Transportation: The appellants admitted that the decision of the apex court in the case of CCE vs. Ultra Tech Cement Ltd. (2018) was against them on the merits regarding the eligibility of CENVAT credit on outward transportation. However, they contended that the substantial demand was beyond the limitation period. The Tribunal noted that the issue of outward transportation as an input service was contentious and subject to various litigations, which indicated that the appellants had a bona fide belief in their entitlement to the credit. The Tribunal cited the Division Bench decision in M/s. Sanghi Industries Ltd. vs. CCE, Kutch, which held that no malafide intention could be attributed to the appellant due to the ongoing litigation and clarifications on the matter. Thus, the Tribunal concluded that the demand for CENVAT credit availed on freight charges paid for the period April 2010 to January 2011 was barred by limitation. 3. Imposition of Penalties: The appellants argued that penalties under Section 11AC of the Central Excise Act, 1944, were not sustainable as the issue involved the interpretation of legal provisions. The Tribunal agreed, noting that when the matter involves legal interpretation, penalties are not justified. This view was supported by several cited decisions, including Transafe Services Ltd. vs CCE, Haldia, and Accenture Services Pvt. Ltd. vs. CST, Mumbai-II. 4. Application of Extended Period of Limitation: The appellants contended that the extended period of limitation under Section 11A could not be invoked as they had not suppressed any facts from the department. They had regularly filed ER-1 returns disclosing the availment of credit, and the department was aware of the credit availed during audits. The Tribunal agreed, citing decisions such as CCE & ST, Tirupathi vs. Sri Sai Sindu Industries and Commissioner vs. Dynamic Industries Ltd., which held that suppression could not be alleged when the matter involves interpretation of legal provisions. The Tribunal also noted that the extended period could not be invoked for the period May 2010 to July 2011, as the department had already issued a show-cause notice for the earlier period on similar facts and issues. Conclusion: The Tribunal allowed the appeals regarding the denial of CENVAT credit on sales commission and partially on outward transportation, holding that the substantial demand was barred by limitation. Penalties were also set aside due to the interpretative nature of the issues involved. The appeals were disposed of accordingly, with the operative portion of the order pronounced in open court.
|
