2017 (12) TMI 426 - AT - Central Excise

CENVAT credit - input service - sales/marketing commission paid on sale of finished goods - Held that - With regard to availment of Cenvat credit on the commission paid for sale promotion activities, the CBEC vide Circular No.943/4/2011-CX. Dated 29/04/2011 has clarified that Cenvat credit is admissible on the services of the sale of the dutiable goods on commission basis. The said circular was endorsed by the Central Government vide N/N. 2/2016-CE (NT) dated 03/02/2016 - this Tribunal in the case of Essar Steel India Ltd. 2016 (4) TMI 232 - CESTAT AHMEDABAD has held that the said notification should be considered as declaratory in nature and effective retrospectively - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Denial of Cenvat credit on sales/marketing commission as an "input service" under Rule 2(l) of the Cenvat Credit Rules.

Analysis:
1. The appeals challenged the orders by the Commissioner of Central Excise denying Cenvat credit on sales/marketing commission as not falling under the definition of "input service" as per Rule 2(l) of the Cenvat Credit Rules. The appellants argued that a notification by the Central Government clarified that sales promotion includes services by way of sale of dutiable goods on commission basis, aligning with a Circular by the CBEC. They relied on a Tribunal decision in Essar Steel India Ltd. case to support their claim that the amount paid for sales promotion activities should be considered for input service credit.

2. The Revenue, represented by the learned DR, supported the findings of the impugned order, citing a judgment by the Hon'ble Gujarat High Court in CCE, Ahmedabad - III Vs. Cadila Healthcare Ltd., stating that commission paid on sale of finished goods does not qualify as an input service for Cenvat credit.

3. The Tribunal heard both sides and examined the case records.

4. The Tribunal referred to Circular No.943/4/2011-CX and Notification No.2/2016-CE (NT) clarifying that Cenvat credit is admissible for services involving the sale of dutiable goods on a commission basis. It noted conflicting judgments by different High Courts, including the Hon'ble Gujarat High Court and the Hon'ble Punjab & Haryana High Court. In the Essar Steel India Ltd. case, the Tribunal held that the notification should be deemed declaratory and effective retrospectively, resolving the conflicting views of the High Courts.

5. Based on the settled legal position and the law, the Tribunal found no merit in the impugned orders. Consequently, it set aside the orders and allowed the appeals in favor of the appellants.