2018 (9) TMI 376 - AT - Central Excise

CENVAT Credit - Input service - brokerage/Commission obtained by the selling the constructed residential units - whether the brokerage/Commission obtained by the selling the constructed residential units is an input service for the appellant? - Held that - The very perusal of Rule 2(1) makes it clear that the explanation to Rule 2(1) of Rule says in clear terms that there is no bar on availment of the Cenvat Credit on sales promotion service by way of sale of dutiable goods on commission basis - Further, by inserting the Explanation in the Rule 2(1), It has confirmed the Board Circular and consequence of the Explanation is to extend the benefit to the assessee. The Explanation inserted in Rule 2(1) of Rules, 2004 by Notification No. 2/2016-CX(N.T) should be declaratory in nature and effective retrospectively. The amount of brokerage/Commission to be eligible as an input service for the entitlement of the assessee for availing the Cenvat Credit thereupon - Appeal dismissed - decided against Revenue.

Summary

Issues:
Appeal against Commissioner (Appeals) order regarding availing Cenvat Credit on brokerage; Retrospective applicability of Rule 2 sub Rule 1 of CCR 2004.

Analysis:
The case involved an appeal by the Revenue against an order of the Commissioner (Appeals) regarding the availing of Cenvat Credit on brokerage by the appellants. The Department contended that the appellants wrongly availed the Cenvat Credit of service tax on brokerage from July 2012 to March 2015, in violation of CCR 2004. The Show Cause Notice demanded reversal of the Cenvat Credit, interest, and penalties, which was confirmed by the Order-in-Original but set aside by the impugned order, leading to the Revenue's appeal.

During the hearing, the main issue discussed was the retrospective applicability of Rule 2 sub Rule 1 of CCR 2004. The Revenue argued that the Commissioner (Appeals) allowed the appeal based on an explanation added to the rule in 2016, despite the explanation coming into effect in that year. The appellant's advocate referenced a previous decision stating that brokerage should be considered as input services eligible for Cenvat Credit, citing a specific case for support.

After considering the arguments, the Tribunal analyzed whether brokerage/commission obtained from selling residential units could be considered an input service for the appellant. The Tribunal referred to the definition of input service under Rule 2(1) of CCR 2004 and highlighted that an explanation inserted in the rule in 2016 clarified that there was no bar on availing Cenvat Credit on sales promotion services by way of sale of dutiable goods on a commission basis. The Tribunal held that the explanation should be declaratory in nature and effective retrospectively, drawing support from a Supreme Court decision and previous Tribunal judgments discussing retrospective applicability.

Ultimately, the Tribunal concluded that the brokerage/commission should be considered eligible as an input service for availing Cenvat Credit, upholding the order under challenge and dismissing the appeal of the department. The decision was based on the retrospective nature of the rule and previous legal interpretations supporting the appellant's position.

This detailed analysis of the judgment highlights the key issues, arguments presented, legal interpretations, and the final decision reached by the Tribunal, providing a comprehensive overview of the case.