2018 (11) TMI 1375 - AT - Central Excise

CENVAT Credit - Input services - service of Commission Agent - Business Auxiliary Services in respect of service tax charged by their Commission Agents for sales promotion of their products, which included procurement of orders for the appellant - CBEC Circular No. 943/4/2011-CX dated 29.04.2011 - Held that - The credit is admissible on the services of sale of dutiable goods on commission basis. The commission is payable only when the services of sale of the dutiable goods are made through another person and not by self what is clear from the above clarification is that it is the credit on services of sale and not sale per se. The above referred CBEC Circular being clarificatory in nature, is retrospective in nature as no substantive change is brought in. The activities undertaken by such Commission Agent/broker would definitely fall under the services of sale because of their responsibilities such as labour, promotion as also the settlement of disputes, if any, collection of dues in time, collection of duly receipted inspection notes, etc. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Disallowance of CENVAT Credit on Business Auxiliary Service by the Adjudicating Authority and the first appellate authority.

Analysis:
The appellant, engaged in manufacturing and sale of Cast Iron Spun Pipes and Ductile Iron Fittings, had taken input credit on Business Auxiliary Services provided by their Commission Agents for sales promotion. Show Cause Notices were issued disallowing the credit on the ground that it did not qualify as an "input service" under the CENVAT Credit Rules. The appellant argued that the services procured orders and facilitated sales promotion, making them eligible for credit. The Adjudicating Authority disallowed the credit on Business Auxiliary Service and imposed recovery of credit taken, along with interest and penalty. The first appellate authority upheld the demand, leading to the appellant's appeal to the Tribunal.

The Tribunal considered whether the services of Commission Agents qualified as eligible input services under the CENVAT Credit Rules. Referring to a CBEC Circular, it clarified that credit is admissible on services of sale of dutiable goods on commission basis, emphasizing that the credit is for services of sale and not sale itself. The Tribunal found that the activities of the Commission Agents, including promotion, dispute settlement, and collection of dues, fell under the category of services of sale. It noted that the CBEC Circular was retrospective and held that the demands and impugned orders were not sustainable.

In conclusion, the Tribunal allowed the appeals, setting aside the demands and impugned orders. The appellant was granted consequential benefits as per law. The decision was based on the interpretation of the CBEC Circular and the nature of services provided by the Commission Agents, ultimately determining that the credit on Business Auxiliary Service was admissible.