2017 (11) TMI 985 - AT - Central Excise

CENVAT credit - input/input services - Commission paid to agents engaged for sale promotion - Transport and Refreshment charges for the manpower employed - Charges for design and development of final products - Held that - at the relevant time Rule 2(l) of Cenvat Credit Rules, 2004, input services includes the sales promotion as well as the activities relating to the business - The Commission was paid for the sales promotion as well as to the activities relating to business - credit allowed. CENVAT credit - Design Development of electronic meters - Held that - It is not necessary for every manufacturer to use every design. Sometimes, designs fail and needs further research to compete in the market - In the instant case, the payment has been made for Research and development which is essentially an activity relating to manufacture of goods and promoting of business - credit allowed. Transportation and refreshment charges - Held that - it appears that services were not provided by the appellant but by the contractor. In the contract, there is no reference pertaining to the transportation/refreshment - credit cannot be allowed. Appeal allowed in part.

Summary

Issues:
1. Disallowance of input service credit on commission paid for sales promotion and liaison work.
2. Disallowance of input service credit on design development charges.
3. Disallowance of input service credit on transportation and refreshment charges for manpower.

Issue 1: Disallowance of input service credit on commission paid for sales promotion and liaison work:
The appellant paid commission to agents for sales promotion and liaison work with a specific entity. The lower authorities disallowed the credit, but the Tribunal found that the commission was for sales promotion and business-related activities, falling under input services as per Rule 2(l) of Cenvat Credit Rules, 2004. The Tribunal noted that the services were not in dispute, and the payment was legitimate. Thus, the appeal was allowed, setting aside the lower order and granting the appellant's claim for the commission paid.

Issue 2: Disallowance of input service credit on design development charges:
The appellant had an agreement for design development with another entity. The lower authorities rejected the claim citing vagueness in the agreement. However, the Tribunal observed that the agreement and payment for research and development were not disputed. It emphasized that such activities are essential for manufacturing goods and business promotion. As there were no discrepancies in the design or payment, the Tribunal allowed the claim for cenvat credit on design development charges, overturning the lower decision.

Issue 3: Disallowance of input service credit on transportation and refreshment charges for manpower:
The appellant engaged a contractor for manpower supply, including transportation and refreshment. The lower authority disallowed the claim, considering it a welfare activity. The Tribunal noted that the services were provided by the contractor, not the appellant directly. As the contract did not specify transportation or refreshment, the Tribunal upheld the lower order, rejecting the claim for input service credit on these grounds.

In conclusion, the Tribunal partially allowed the appeal by granting the input service credit for commission paid for sales promotion and liaison work, as well as for design development charges. However, the claim for input service credit on transportation and refreshment charges for manpower was rejected.