2011 (7) TMI 175 - AT - Service Tax

Demand - Business Auxiliary Services and Goods Transport Agency services - Sales promotion connotes with promotion that supplements or coordinate advertising, promotional material, publicity, packing or a message issued to on behalf of the assessee s final products intended to increase the sales - it can be concluded that legislative intent in respect of inputs, for manufacture and input service, in case of manufacture, are to be treated differently and when input services are rendered in relation to the business activity, credit is admissible - The respondents are therefore eligible for the benefit of credit of service tax paid on the services rendered by the agent - Appeal is disposed of

Summary

Issues:
1. Eligibility of availing cenvat credit on commission paid to foreign parties under Business Auxiliary Services.
2. Interpretation of input services in relation to business activities for cenvat credit.
3. Application of precedents in determining eligibility for cenvat credit.

Analysis:
1. The appeal before the Appellate Tribunal concerned the Revenue challenging the order of the Commissioner (Appeal) regarding the eligibility of M/s. Hindalco Industries Limited to avail cenvat credit on commission paid to foreign parties under Business Auxiliary Services. The Revenue contended that the commission paid did not qualify as input services. The original adjudicating authority and the Commissioner (Appeal) had both ruled in favor of the assessee, upholding that the services provided by the commission agents for procuring export orders fell under the category of sales promotion, making them eligible as input services. This view was supported by the interpretation that sales promotion includes activities intended to increase sales, aligning with the business activities of the assessee.

2. The Tribunal referred to previous judgments in similar cases to support its decision. It cited the case of M/s. Excel Crop Care Limited vs. CCE, where it was held that services availed in respect of export, like CHA services, do not have a nexus with the manufacture and clearance of products and thus do not qualify as input services. The Tribunal also mentioned the case of Nirma Limited vs. CCE, Bhavnagar, and CCE Vapi vs. Nilkamal Crates & Bins to emphasize the distinction between services rendered up to the place of removal and those beyond it. The Tribunal concluded that the legislative intent differentiates between inputs for manufacture and input services in relation to business activities, making credit admissible for the latter. It was established that the service of a commission agent contributes to increasing sales and is related to the business activity, aligning with the decision of the Hon'ble High Court of Mumbai in the case of M/s. Coca-cola India (P) Limited.

3. Considering the arguments and precedents, the Tribunal found that the commission paid to foreign parties by M/s. Hindalco Industries Limited was eligible for cenvat credit as input services. The appeal filed by the Revenue was deemed devoid of merits and rejected, while the cross objection filed by the respondents was also disposed of in their favor. The decision highlighted the importance of interpreting input services in the context of business activities and the impact on sales promotion, ultimately supporting the eligibility of the assessee for the benefit of credit on service tax paid.