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TMI Blog2019 (3) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... es will be sales commission wherever consideration is determined basis the sales percentage regardless of the activity undertaken. The contention flies in face of logic. The definition of input service is contained in Credit Rules, whose overall objective is to eliminate cascading effect. The cascading effect has degenerative effect on the economy and burdens the ultimate consumer. The beneficent intent of Credit Rules calls for a liberal approach to interpretation of provisions contained therein. The Means clause is not merely restricted to processing and clearing of goods. The activity of manufacture is not possible without use of inputs, capital goods and input services. Thus, services received for procurement of inputs and capital goods will also fall within the sweep of Means clause - The Inclusive clause further extends the scope of input service to cover services used in relation to broad heads mentioned therein. These broad heads cover, legal, accounting, credit rating, share register, financing. These broad heads cover a range of services which are not theoretically essential for undertaking manufacturing activity but are important for infusing commercial feasibiliti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impending termination of dealer to ensure timely recovery of sale proceeds. It is trite that sales proceeds form a major source of internal finances - the services are squarely covered under ‘financing’ in Inclusive clause - credit allowed. Market information service - Held that:- The sustenance of a strong vendor and dealer network is vital for continuous manufacturing activity. The Appellant through such interactions can ensure that the concerns highlighted by vendors and dealers can be rectified in timely manner without having an adverse impact on manufacturing activity. The above services are part and parcel of business of manufacturing activity covered under Means clause - The above services are also covered under ‘procurement of inputs’, ‘sales promotion’ and ‘quality control’ specifically mentioned under Inclusive clause - credit allowed. Also, there is no merit in the revenue’s contention that services must be received within the factory in order to qualify as ‘input service’. Services of sales commission agent - Held that:- Since, it s already held that impugned services do not qualify as ‘sales commission agent’ and further observed that impugned services fall w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on impugned services. Salient aspects of these services as referred in Service Agreement are as under: Development of vendor network; Development of dealer network; Support for quality management; Marketing and promotion support; Assistance in statutory compliance; Assistance in collection of funds; Market information service; and Business support service 4. The Adjudicating Authority vide its Impugned Order has denied the benefit of credit basis ground that impugned services do not qualify as input service . 5. We have heard Shri Puneet Bansal, Ld. Advocate appearing on behalf of the Appellant. The Ld. AR furnished a detailed chart referring to broad service head, nature of services received and the relevant part of the definition of input service under which the same is covered. The chart is reproduced as under: Nature of service as per agreement Activities undertaken by HMSI Relevant clause under consideration Means Clause Inclusive clause Development of vendor network HMSI identifies potential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of funds Noticee takes recourse to HMSI s field staff for follow up with dealer for settlement of accounts and balance reconciliations; and HMSI intimates Noticee before termination of dealership. The Noticee accordingly ensures recovery of balance payable for closure of accounts Services used in or in relation to manufacture and clearance of final products Market information service HMSI undertakes market research activities of collating data of dealer s performance (sales) and prepares a Key Performance Indicator Report ( KPI Report ); The KPI Report further records performance of Honda dealership network as against that of competitors; HMSI provides data in respect of two-wheelers on road which helps Noticee to effectively map resources to achieve short-term and long-term business plans; and HMSI intimates Noticee of its plans to terminate a model. Noticee manages its procurements on basis of such data Services used in or in relation to manufacture and clearance of final products Procurement of inputs, Market research ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services inward transportation of inputs or capital goods and outward transportation up to the place of removal, but excludes ...; 10. The definition of input service is divided into three parts: Means clause, covering services used directly or indirectly, in or in relation to manufacture or clearance of final product; Inclusive clause, covering wide range of services used in relation to the broad heads specified therein; and Exclusion clause, covering specific services excluded from the definition 11. The above definition is contained in Credit Rules, whose overall objective is to eliminate cascading effect. The cascading effect has degenerative effect on the economy and burdens the ultimate consumer. The beneficent intent of Credit Rules calls for a liberal approach to interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, the activity of clearance is not possible without presence of dealers in favour of whom sales can be conducted. Wehave been informed that these dealers form the major source of customers to whom Appellant supplies its final products. Thus, the above activity is squarely covered under the Means clause. The above services also qualify under sales promotion specifically mentioned under Inclusive clause. Support for quality management 17. HMSI inspects two-wheelers upon receiving a complaint. In case defect is found in any of the parts, HMSI issues an alert to Appellant for undertaking necessary measures. The Appellant may on such alert identify the stocks kept, cease procurements from certain vendors and hold dispatches. The above services form advance alert mechanism helping the Appellant ensure quality of manufactured final products supplied. Thus, these services squarely qualify under quality control specifically mentioned under Inclusive clause. Marketing and promotion support 18. HMSI promotes use of Honda genuine parts and accessories on its website, through provision of standees at dealers showroom and organising dealer training programs. Blac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t having an adverse impact on manufacturing activity. The above services are part and parcel of business of manufacturing activity covered under Means clause. The above services are also covered under procurement of inputs , sales promotion and quality control specifically mentioned under Inclusive clause. 23. We also do not find any merit in the revenue s contention that services must be received within the factory in order to qualify as input service . In this regard, Rule 3 of the Credit Rules allows a manufacturer to avail cenvat credit on input services received . It is noteworthy, that the availment of credit on input service is not qualified by the condition that such service must be received within the factory. The above view has been upheld in following judicial precedents: CCE v. Ultratech Cement Limited, 2010 (260) ELT 369 (Bom.); CCE v. Ultratech Cement Limited, 2012 (278) ELT 523 (Tri-Mum.); and Golden Tobacco Limited v. CCE, 2013 (32) STR 474 (Tri-Mum.) 24. Accordingly, we hold that Appellant rightly availed cenvat credit on impugned services in terms of the Credit Rules. Consequently, the impugned order denying cenvat credit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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