2024 (3) TMI 450 - AT - Central Excise

Reversal of CENVAT Credit - commission amount paid to commission agent - Business Auxiliary Service or not - Extended period of limitation - HELD THAT - The issue is no more res integra. This Bench in PRINCIPAL COMMISSIONER OF CENTRAL EXCISE, KOLKATA IV VERSUS M/S. HIMADRI SPECIALITY CHEMICAL LIMITED 2022 (9) TMI 1213 - CALCUTTA HIGH COURT has held the issue relating to eligibility of credit on commission agent services is no longer res-integra inasmuch as this Tribunal in M/S ESSAR STEEL INDIA LTD. VERSUS COMMISSIONER OF C. EX. SERVICE TAX, SURAT-I 2016 (4) TMI 232 - CESTAT AHMEDABAD , as also relied by the appellant, has held that the above amendment would be applicable retrospectively and would cover cases for the past period also. Extended period of limitation - HELD THAT - The Department was in full knowledge of the transactions made by the Appellant by May 2014 itself. Therefore, the Department had no reason to delay the issue of Show Cause Notice by another two and half year. The Department has not made out any case of suppression on the part of the Appellant except for relying on the COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD II VERSUS M/S CADILA HEALTH CARE LTD. 2013 (1) TMI 304 - GUJARAT HIGH COURT relied by the Hon ble Gujarat High Court. Therefore, the confirmed demand is not sustainable even on account of limitation. Appeal allowed.

Summary

Issues:
The issues involved in the judgment are the eligibility of Cenvat Credit for commission charges and sales promotion charges paid to distributors, reliance on case law, applicability of amendments, retrospective effect of decisions, and the validity of the Show Cause Notice issued.

Eligibility of Cenvat Credit:
The Appellants, engaged in manufacturing Ferrite Core and Ferrite Power, claimed Cenvat Credit for Service Tax paid on commission and sales promotion charges to distributors. The Department objected, citing a case law where it was held that commission amounts paid to agents were not eligible for Cenvat Credit. The Appellants clarified that the payments were not just for commission but also for various promotional activities. The Tribunal referred to a Supreme Court order which set aside the earlier judgment, indicating that the Cadila judgment was no longer in force. Additionally, an amendment was considered, stating that sales promotion includes services on a commission basis. The Tribunal held that the Appellants were eligible for Cenvat Credit based on previous decisions and the amendment, with retrospective effect.

Validity of Show Cause Notice:
The Appellant argued that the Show Cause Notice issued after more than two and a half years was time-barred. They had disclosed the Cenvat Credit in their returns, and the Department was aware of the transactions since May 2014. The Department failed to show any suppression by the Appellant, relying solely on the Cadila case law. The Tribunal held that the confirmed demand was not sustainable due to the limitation issue. The Appeal was allowed on merits, with the Tribunal finding that the Show Cause Notice was invalid and the confirmed demand could not be upheld.

Significant Legal References:
- The Tribunal referred to a Supreme Court order setting aside a previous judgment on commission payments to agents.
- An amendment was considered, stating that sales promotion includes services on a commission basis.
- Various Tribunal decisions were cited to support the eligibility of Cenvat Credit for commission payments.
- The Tribunal highlighted the retrospective effect of the decisions and amendments in determining the Appellants' eligibility for Cenvat Credit.