2021 (8) TMI 1112 - AT - Central Excise

CENVAT Credit - input services - commission paid to the various financers for selling their vehicles - Rule 2 (l) of the Cenvat Credit Rules, 2004 - HELD THAT - The appellant is paying commission to the financers for selling their vehicles to various prospective buyers on the vehicles manufactured by the appellant. If these financers do not finance the vehicles manufactured by the appellant, the vehicles of the appellant are not able to be sold in the open market freely. Therefore, these financers are indirectly providing the services of sales promotion to the appellant. Sales promotion is inclusive part of the definition and the same can be availed beyond the place of removal as there is no bar on the same in the definition itself. Thus, on commission paid to various financers for arranging the prospective buyers to the appellant for sale of vehicles, the appellant is entitled to take cenvat credit as sale promotion is an input service - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Denial of Cenvat credit on financial incentive/commission paid to financial institutions.
2. Interpretation of "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004.
3. Nexus between financial services and sales promotion activities.
4. Admissibility of documents and legal evidence for claiming Cenvat credit.

Issue-wise Detailed Analysis:

1. Denial of Cenvat Credit on Financial Incentive/Commission Paid to Financial Institutions:
The appellant, a manufacturer of motor vehicles, contested the denial of Cenvat credit on financial incentives/commissions paid to financial institutions like Tata Motor Finance Ltd., Finance, and Mahindra & Mahindra Financial. These payments were claimed to be for services related to financing and sales promotion. The adjudicating authority had previously denied this credit, leading to the present appeal.

2. Interpretation of "Input Service" Under Rule 2(l) of the Cenvat Credit Rules, 2004:
The core issue was the interpretation of "input service" as per Rule 2(l) of the Cenvat Credit Rules, 2004. The appellant argued that the definition of "input service" includes services used in relation to the business of manufacturing, including sales promotion. The inclusive part of the definition expands its scope to cover modern business practices like co-branded advertising and mutual sales promotion efforts. The appellant contended that the financial institutions' activities fell within this ambit.

3. Nexus Between Financial Services and Sales Promotion Activities:
The appellant highlighted that financial institutions undertook various promotional activities, such as direct marketing, developing financial packages, and displaying promotional materials, which directly contributed to the sales of the appellant's vehicles. The services provided by financial institutions were argued to be integral to sales promotion, thus qualifying as "input service." The appellant cited the case of TVS Motor Company Ltd., where the Hon’ble Madras High Court recognized the nexus between financing services and sales promotion.

4. Admissibility of Documents and Legal Evidence for Claiming Cenvat Credit:
The respondent argued that the services provided by financial institutions were outside the place of removal and thus not admissible for Cenvat credit. They also contended that the appellant failed to provide legally admissible documents to substantiate the claim. The appellant countered that the MOU with financial institutions detailed the promotional activities and the commission paid, establishing a direct link to sales promotion.

Judgment:
The Tribunal examined the definition of "input service" and the activities undertaken by financial institutions as per the MOU. It was concluded that the commission paid to financial institutions for promoting vehicle sales fell within the definition of "input service." The Tribunal referenced the TVS Motor Company Ltd. case, affirming that financing services promoting sales qualify as taxable under Business Auxiliary Services. Consequently, the appellant was entitled to Cenvat credit on the commission paid for sales promotion activities.

Conclusion:
The impugned order was set aside, and the appeal was allowed with consequential relief. The Tribunal held that the appellant was entitled to Cenvat credit on the commission paid to financial institutions for sales promotion, as these services were integral to the business of manufacturing and sales.

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