2019 (8) TMI 957 - AT - Central Excise

CENVAT Credit - input services - commission paid to the Del Credere Agent - case of Department is that the services provided by the Del Credere Agent are utilized by the Appellants for post removal activities and as such they are not covered within the definition of input service - HELD THAT - It is clear that the Del Credere Agents are evaluating the prospective customers and also guarantee the collection for the dues. As per the agreement the Del Credere Agent at its own cost and expenses appoint subagents/ employees wherever required for the business of the Appellant and for canvassing upto date information of the existing and anticipated buyers with whom the Appellant has dealt or intend to deal. The agreements further provides that the Del Credere Agent will be solely responsible for guaranteeing the solvency of the buyers and will effectively guarantee for the value of bad doubtful debts arising out of such sales made by them and as such will guarantee to compensate the whole amount of doubtful recovery within the normal credit period assigned by them. A reading of the agreement between Appellant and Del Credere Agent would establish that it is related to the sales promotion. Only because some clause of the agreement mentioned that they won t provide any guarantee where the recoveries are held up due to poor quality or quantity of the product supplied by them does not take it outside the purview of Business Auxiliary Service and in view of that it cannot be said that the services of the Del Credere Agents were exclusively utilized by the appellants for post removal activities only. If that is the situation then it can very well said to be the input service as per Rule 2(l) ibid. Reference made to the Tribunal in JODHANI PAPERS LTD. VERSUS COMMISSIONER OF C. EX. BANGALORE-II 2015 (10) TMI 51 - CESTAT BANGALORE where it was held that the words upto the place of removal has been used only in respect of few input services in the definition under Rule 2(l) and this restrictive clause cannot be applied to all the cases. The services provided by Del Credere Agents is Business Auxiliary Service and the same is for the promotion of the business of the Appellant and therefore it is an input service . The Appellant is therefore entitled for Cenvat Credit and the impugned order is liable to be set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Admissibility of Cenvat Credit for service tax paid on commission to Del Credere Agent.
2. Interpretation of the definition of 'input service' in relation to post removal activities.
3. Classification of services provided by Del Credere Agent as Business Auxiliary Service.
4. Applicability of precedent judgments in determining admissibility of Cenvat Credit.

Analysis:
1. The case involved a dispute regarding the admissibility of Cenvat Credit for service tax paid on commission to a Del Credere Agent by the Appellants engaged in manufacturing excisable goods. The department contended that the services provided by the Agent were utilized for post removal activities and thus did not qualify as 'input service' under the law. Show cause notices were issued, leading to appeals before the Commissioner (Appeals) against Orders-in-Original disallowing the Cenvat Credit.

2. The Appellant argued that the denial of Cenvat Credit was solely based on the premise that the services provided by the Del Credere Agent were utilized for post removal activities, contending that such services fell under Business Auxiliary Service and were eligible for Cenvat Credit. The Appellant cited relevant agreements and legal precedents to support their claim, emphasizing that the services were for sales promotion and should be considered 'input service'.

3. The Tribunal analyzed the agreement between the Appellants and the Del Credere Agent, noting clauses that highlighted the Agent's responsibilities in guaranteeing solvency of buyers and recovering doubtful debts. Referring to precedent judgments, including the matter of Millenium Marketing Co., the Tribunal concluded that the services provided by the Agent were related to sales promotion and classified as Business Auxiliary Service. The Tribunal emphasized that the restrictive clause regarding poor quality or quantity of products did not exclude the services from being considered 'input service'.

4. Ultimately, the Tribunal held that the services provided by the Del Credere Agent constituted Business Auxiliary Service for the promotion of the Appellant's business, qualifying as 'input service' for Cenvat Credit. The impugned order disallowing the credit was set aside, and the Appeals filed by the Appellant were allowed with consequential relief as per law.

Conclusion:
The judgment by the Appellate Tribunal CESTAT MUMBAI addressed the issues of Cenvat Credit admissibility, interpretation of 'input service' definition, classification of services as Business Auxiliary Service, and the applicability of precedent judgments. The Tribunal ruled in favor of the Appellant, allowing the Cenvat Credit for service tax paid on commission to the Del Credere Agent, emphasizing that the services provided were for sales promotion and qualified as 'input service' under the law.