2023 (3) TMI 575 - AT - Service Tax

CENVAT Credit - services provided by the Commission Agent - appellant submits that the Services of the Commission Agent is not in relation to either sale of their product or for providing any sales promotion services - HELD THAT - Hon ble Gujarat High Court in the case of COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD II VERSUS M/S CADILA HEALTH CARE LTD. 2013 (1) TMI 304 - GUJARAT HIGH COURT has held that the commission agent merely acts as an agent of the principal for sale of goods and such sales are directly made by the commission agent to the consumer - it can be observed that the issue before the Hon ble High Court was in respect of sale of goods, promotion of sale of goods, etc. by the Commission Agent The Hon ble High Court held as Commission Agent in this case is only selling the goods and not undertaking any Sales Promotion work, the Respondent would not be eligible for the Cenvat Credit. Further it would be relevant to note here that an amendment was brought in w.e.f. 3.2.2016 to allow Cenvat Credit on Sales Promotion also, so as to overcome the difficulty faced by the assesses in view of Gujrat High Court Decision. In the present case, the Commission Agent is not rendering any service towards sale/Sales Promotion of the present Appellant. The Commission Agent is only an Agent engaged in collection of debts from various subscribers. Therefore, the very premise to issue Show Cause Notice basing on the decision of the Hon ble Gujarat High Court is erroneous on the part of Department. The Hon ble Gujarat High Court judgment is on an entirely different type of Commission Agent and is not applicable to the facts of present case. The Hyderabad Tribunal in the case of PEPSICO INDIA HOLDINGS (PVT.) LTD. VERSUS COMMISSIONER OF CENTRAL TAX, TIRUPATI 2021 (7) TMI 1094 - CESTAT HYDERABAD has held that Services used in setting up the factory are, therefore, unambiguously covered as input services under Rule 2(l)(ii) of the Cenvat Credit Rules, 2004 as they stood during the relevant period (post 1-4-2011). The mere fact that it is again not mentioned in the inclusive part of the definition makes no difference. Once it is covered in the main part of the definition of input service, unless it is specifically excluded under the exclusion part of the definition, the appellant is entitled to Cenvat credit on the input services used. Extended period of limitation - HELD THAT - The fact of taking Cenvat Credit on Commission Agent Service is regularly reported in the periodical STReturns filed by the Appellant. Further, the issue of Cenvat Credit on Commission Agent Service is a matter of interpretation and the Department was in error in equating Collection Agent s service in the present case with that of the service provided by the Commission Agent towards sale of goods/sales promotion in the Cadilla Case 2013 (1) TMI 304 - GUJARAT HIGH COURT . Therefore, the allegation of suppression with an intent to evade cannot be sustained. Hence, the proceedings are hit by limitation and the confirmed demand for the extended period is set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Eligibility of Cenvat Credit for services provided by Commission Agents.
2. Whether the Commissioner (Appeals) traversed beyond the Show Cause Notice.
3. Time-barred demand and suppression of facts.

Detailed Analysis:

1. Eligibility of Cenvat Credit for services provided by Commission Agents:
The primary issue revolves around whether the Appellant is eligible to take Cenvat Credit for services provided by Commission Agents. The Department relied on the judgment of the Hon'ble High Court of Gujarat in Commissioner of C. Ex-Ahmedabad v. Cadila Healthcare Ltd. [2013 (30) STR 3 (Guj)], which held that Cenvat Credit is not eligible for services rendered by Commission Agents involved in sales. The Adjudicating Authority confirmed the demand, and the Commissioner (Appeals) upheld this decision. However, the Appellant argued that the services of the Commission Agent were for debt collection from subscribers, not for sales or sales promotion. Supporting case laws from CESTAT, Chennai, and Mumbai were cited, which allowed Cenvat Credit for similar services. The Tribunal observed that the Gujarat High Court's judgment pertained to sales promotion, whereas the Appellant's case involved debt collection, thus making the Department's reliance on the Cadila case erroneous. The Tribunal concluded that the services used for debt collection are integral to the Appellant's business and fall under the definition of input services as per Rule 2(l) of the Cenvat Credit Rules, 2004.

2. Whether the Commissioner (Appeals) traversed beyond the Show Cause Notice:
The Appellant contended that the Commissioner (Appeals) went beyond the Show Cause Notice (SCN) by holding that the collection of debt service is received subsequent to the mobile services provided by the Appellant, thus disallowing the credit. The Tribunal did not delve into this issue, as the appeal was decided on merits and limitation grounds.

3. Time-barred demand and suppression of facts:
The Appellant argued that the demand is time-barred as all relevant details were furnished in the ST-3 Returns, and there was no suppression of facts. The Tribunal agreed, noting that the issue of Cenvat Credit on Commission Agent Service is a matter of interpretation. The Department's error in equating the Collection Agent's service with sales promotion services in the Cadila case indicated that there was no intent to evade tax. Consequently, the Tribunal held that the proceedings were hit by limitation, and the confirmed demand for the extended period was set aside.

Conclusion:
The Tribunal allowed the appeal on merits, recognizing the eligibility of Cenvat Credit for services used in debt collection. It also set aside the demand for the extended period, citing the absence of suppression of facts. The issue of whether the Commissioner (Appeals) traversed beyond the SCN was not addressed due to the resolution on other grounds. The appeal was allowed with consequential relief.