2021 (10) TMI 810 - AT - Central Excise

Refund claim against reversal of CENVAT Credit - input services or not - sales commission - refund rejected on the ground that sales commission is not input service and also on the ground that the appellant have admittedly reversed the amount without under protest - HELD THAT - It is found that the reversal was made on the objection of the audit party. Though the reversal was not made under protest but the appellant has right to claim refund within one year as mandated under section 11B of Central Excise Act,1944., therefore only on the ground that the appellant has not filed under protest letter while reversing the credit refund cannot be rejected on this ground. As regard the merit that whether the sales commission is admissible input service or otherwise the issue is subjudice before the Hon ble High Court of Gujarat in the case of Essar steel India Ltd. 2016 (4) TMI 232 - CESTAT AHMEDABAD and Cadila Health Care Ltd. 2013 (1) TMI 304 - GUJARAT HIGH COURT . Therefore, at this stage the merit cannot be decided. Appeal remanded to the Adjudicating Authority for passing a fresh order after the legal issue is settled on the admissibility of the Cenvat Credit on sales commission by the Hon ble Apex Court in the case of M/s. Cadila HealthCare Ltd. and also by the Hon ble High Court in the case of Essar Steel India Ltd. - appeal allowed by way of remand.

Summary

Issues:
1. Admissibility of Cenvat Credit on sales commission.
2. Rejection of refund claim on the ground of reversal without protest.
3. Pending legal issues before the Hon'ble Gujarat High Court and the Hon'ble Supreme Court.

Analysis:
1. The appellant availed Cenvat Credit on sales commission, which was later reversed based on an objection raised by audit officers. The appellant filed a refund claim within one year of reversal, citing a subsequent legal development allowing such credit. The adjudicating authority rejected the refund claim, stating that sales commission is not an admissible input service. The Commissioner (Appeals) upheld this decision solely on the basis of the input service definition. The appellant contended that the department did not issue a show cause notice on the inadmissibility of the credit, and legal cases pending before higher courts further support the admissibility argument.

2. The appellant argued that despite not lodging a protest while reversing the credit, they were within their right to file a refund claim within the stipulated one-year period under the Central Excise Act, 1944. The revenue representative relied on a tribunal judgment to assert that once an amount is paid and finalized, no refund claim can be entertained. However, the tribunal found that the appellant's right to claim a refund within the specified period cannot be denied solely based on the absence of a protest letter during the credit reversal.

3. The tribunal acknowledged that the issue of sales commission as an admissible input service is sub judice before the Hon'ble Gujarat High Court and the Hon'ble Supreme Court in relevant cases. Consequently, the tribunal set aside the impugned order and allowed the appeal by remanding the case to the Adjudicating Authority. The remand was ordered for a fresh decision after the legal clarity on the admissibility of Cenvat Credit on sales commission is provided by the higher courts in the pending cases.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT AHMEDABAD highlights the complexities surrounding the admissibility of Cenvat Credit on sales commission, the procedural aspects of refund claims, and the significance of pending legal interpretations by higher courts in resolving such disputes.