2022 (11) TMI 97 - AT - Central Excise

CENVAT Credit - input services - sale commission - whether commission agent is directly concerned with sales rather than sales promotion for which the same would not fall within the definition of input services? - effect of N/N. 2/2016-CE(NT) - contention of the Respondent-Department is that the said notification is prospective in nature while Appellant claims that being a beneficial provision, it is a clarification which is retrospective in nature and it covers the period of dispute of Appellant occurred post 2011 amendment. HELD THAT - Learned Counsel for the Appellant Mr. Harish Bindumadhavan draws attention of this Bench to the decision rendered by this Tribunal in M/S ESSAR STEEL INDIA LTD. VERSUS COMMISSIONER OF C. EX. SERVICE TAX, SURAT-I 2016 (4) TMI 232 - CESTAT AHMEDABAD wherein by applying the ratio of the judgment passed by the Hon'ble Supreme Court in the case of COMMISSIONER OF INCOME TAX (CENTRAL) -I, NEW DELHI VERSUS VATIKA TOWNSHIP PRIVATE LIMITED 2014 (9) TMI 576 - SUPREME COURT it was held that explanation inserted in Rule 2(l) of Rules, 2004 that is in conformity to Board Circular dated 29.04.2011 extending benefit to the assessee would have retrospective effect. Thus, Appellant is eligible to avail credits on the tax paid on sale commission paid to both Indian and overseas agents for the period between April, 2013 and August, 2015 - appeal allowed - decided in favor of appellant.

Summary

Issues:
Proposal to deny CENVAT Credit on sale commission; Interpretation of input services under CENVAT Credit Rules 2004; Applicability of Notification No. 2/2016-CE(NT); Retrospective effect of clarificatory notifications.

The judgment dealt with the issue of denying CENVAT Credit on sale commission amounting to Rs.9,56,090/- to the Appellant. The case arose from an EA-2000 Audit in the Appellant's manufacturing unit, which revealed that credits were availed against services by commission agents. The Appellant was aware of the difference between promotional expenses and sales commission, leading to a show-cause notice for recovery of credits against sale promotion. The demand was confirmed with interest and penalties, which the Appellant challenged before the Commissioner (Appeals) and subsequently in this appeal.

The main contention revolved around the interpretation of input services under Rule 2(l) of the CENVAT Credit Rules 2004. The Respondent argued that the expenditure bifurcation into "promotional expenses" and "sales commission" indicated the Appellant's awareness of the distinction, citing a relevant case law. On the other hand, the Appellant relied on an amendment to the definition of input services in 2011 and a clarificatory notification in 2016, which included sale of dutiable goods on a commission basis under sales promotion. The Appellant argued that the services received fell within the meaning of Board Circular No. 943/04/2011-CX, making them eligible for credit.

Regarding the applicability of Notification No. 2/2016-CE(NT), the Respondent contended that it was prospective, while the Appellant claimed it was retrospective and covered the disputed period post the 2011 amendment. The Appellant cited judicial precedents to support the retrospective effect of beneficial provisions, emphasizing that the explanation inserted in Rule 2(l) of the Rules was in line with Board Circulars extending benefits to the assessee. The Tribunal, considering the precedents and its earlier orders, held that the Appellant was eligible to avail credits on the tax paid on sale commission to both Indian and overseas agents for the period between April 2013 and August 2015.

In the final order, the appeal was allowed, setting aside the order passed by the Commissioner of Central Excise & GST (Appeals). The Tribunal's decision was based on the retrospective effect of the clarificatory notifications and the eligibility of the Appellant to claim CENVAT Credit on the sale commission paid to agents, both Indian and overseas, during the specified period.