2021 (5) TMI 676 - AT - Central Excise

CENVAT Credit - input service - sales commission - HELD THAT - The sales commission is directly attributable to sales of the products. Any activity which amounts to sale of the products is deemed to be sales promotion activity in the normal trade parlance - If there is no sale, there would not be any need to manufacture the products. Be that so as it may, to increase the manufacturing activity an encouragement is being given by way of sales commission for achieving increased sales. Hon ble High Court of Punjab Haryana in the case of COMMISSIONER OF CENTRAL EXCISE, LUDHIANA VERSUS AMBIKA OVERSEAS 2011 (7) TMI 980 - PUNJAB HARYANA HIGH COURT , had clearly held that the sale and manufacture are directed inter-related and the commission paid on sales needs to be accounted for as services related to sales promotion. The impugned order cannot be sustained and is, therefore, set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Cenvat credit eligibility on sales commission as input service.

Analysis:
The case involved the appellants availing cenvat credit on service tax paid for sales commission to M/s Nicco Parks, which was disputed by the authorities. The Adjudicating Authority disallowed the credit, leading to a demand for Central Excise duty, interest, and penalties. The lower Appellate Authority upheld this decision, prompting the present appeal.

The appellant argued that the sales commission paid to M/s Nicco Parks was directly linked to sales and promotion of their products, qualifying as an eligible input service under the Cenvat Credit Rules, 2004. The appellant cited legal provisions, circulars, and instructions to support their claim. They also contended that the retrospective effect of an Explanation added to the definition of "input service" was relevant to their case.

Furthermore, the appellant claimed that the demand was time-barred as the conditions for invoking a longer limitation period were not met. They demonstrated regular submission of Cenvat Credit Registers and ER I Returns to the Department, emphasizing the absence of factors like fraud or suppression of facts to warrant an extended limitation period.

In contrast, the Revenue argued that the sales commission did not qualify as an eligible input service, referencing a judgment by the High Court of Gujarat. They supported the disallowance of cenvat credit and urged the Tribunal to dismiss the appeal.

After hearing both sides and examining the records, the Tribunal found that the sales commission was directly linked to sales and constituted a form of sales promotion. Citing precedents, including decisions by the Hon'ble High Court of Punjab & Haryana and the Tribunal itself, the Tribunal concluded that the Explanation in the Cenvat Credit Rules had retrospective applicability. Consequently, the impugned order disallowing the credit was set aside, and the appeal was allowed with consequential relief as per the law.

In conclusion, the Tribunal's judgment favored the appellant's position, recognizing the sales commission as an eligible input service and overturning the previous decisions disallowing the cenvat credit.