2024 (10) TMI 503 - AT - Central Excise

Recovery of inadmissible CENVAT Credit on interest and penalty - input service or not - service tax paid on sales commission - Business Auxiliary Service - HELD THAT - Undisputedly, the appellant who manufactures, inter alia, LPG gas stoves, entered into agreements / MOUs with various oil companies including BPCL would be sold through BPCL s distributors and agreed to pay commission as stipulated in the said agreement. Since the commission paid to BPCL is leviable to service tax, appellant discharged service tax on the sales commission which they had later availed as credit being an input service. On a plain reading of the definition of input service , it is clear that advertisement or sales promotion service has been specifically included in the scope of the input service defined under Rule 2(l) of the CCR, 2004. Besides being a manufacturer of excisable goods, marketing expenses incurred till the date of delivery apparently sale of the goods as held by the Hon ble Supreme Court in the case of UNION OF INDIA ORS. ETC., ETC. VERSUS BOMBAY TYRE INTERNATIONAL LTD. ETC., ETC. 1983 (10) TMI 51 - SUPREME COURT ought to be included in the assessable value of the goods for the purpose of payment of duty. Therefore, the commissions paid under the agreement / MOU for sale of their gas stoves through the distributors of BPCL definitely would fall within the scope of the definition of input service. The service tax paid on the sales commissions is admissible as credit to the appellant. In the result, the impugned orders are set aside being devoid of merit - Appeal allowed.

Summary

Issues:
- Whether the appellants are entitled to avail cenvat credit of the service tax paid on sales commission during the relevant period.

Analysis:
1. Background: The judgment involves four appeals filed against impugned orders passed by the Commissioner of Central Excise, Bangalore. The appeals were related to the admissibility of cenvat credit of service tax paid on sales commission by the appellants who were engaged in manufacturing excisable goods and providing Business Auxiliary Services.

2. Facts of the Case: The appellants availed cenvat credit of service tax paid on sales commission, which was objected by the Revenue. Show-cause notices were issued proposing recovery of the credit amount along with interest and penalty. The demands were confirmed on adjudication, leading to the filing of appeals against the Orders-in-Original.

3. Appellant's Argument: The appellant contended that the sales promotion services fall within the scope of input services as defined under the Cenvat Credit Rules, 2004. They argued that the commissions paid to oil companies for marketing their products were admissible for cenvat credit. The appellant cited various judgments supporting their claim, including those by the Tribunal and High Courts.

4. Revenue's Argument: The Revenue reiterated the findings of the Commissioner and referred to a judgment by the Hon'ble Gujarat High Court to argue against the admissibility of cenvat credit for commission paid to foreign agents.

5. Court's Analysis: The Tribunal analyzed the definition of "input service" under the Cenvat Credit Rules, 2004 for the relevant periods. The definition included services related to advertisement or sales promotion. The Tribunal also considered previous judgments by the Supreme Court and High Courts, which supported the admissibility of cenvat credit on service tax paid for sales promotion activities.

6. Decision: After considering the arguments and precedents, the Tribunal held that the service tax paid on sales commissions was admissible as credit to the appellant. The impugned orders were set aside for lacking merit, and the appeals were allowed with consequential relief as per the law.

7. Conclusion: The judgment clarified the admissibility of cenvat credit on service tax paid for sales commission, emphasizing the inclusion of sales promotion services in the scope of input services. The decision was based on a thorough analysis of relevant legal provisions and precedents, ultimately ruling in favor of the appellant.

*(Order pronounced in Open Court on 09.10.2024)*