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TMI Blog2022 (9) TMI 1213X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the foreign agents, courier service etc. The revenue took a stand that CENVAT Credit of service tax paid on the above services is not admissible. Challenging the findings of the adjudicating authority, appeal was filed before the tribunal. Ultimately the matter travelled to the High Court. The High Court held that in the absence of any material on record, there is nothing to indicate that commission agent were involved in the activities of sales promotion and that the claim of the assessee was accordingly rejected. Thus, the Court took note of the factual position in the case that there was nothing to indicate that the commission agents were involved in the sales promotion activities, contrary to the case on hand where agreements were produced before the authority to show what is the nature of services rendered by those commission stockists. Firstly, the decisions of one other High Court in all cases will not bind another High Court and such decisions were held to be of persuasive value. In any event on facts in Cadila Health Care Limited, the Court found no material on record to indicate that commission agents were involved in the activities of sales promotion - Further it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04 is retrospective in nature or otherwise? iv) Whether the Learned Tribunal erred in setting aside of the order in original dated 24.05.2018 without deciding the core issue? v) Whether the Learned Tribunal fell in error in not considering the position as specific allegation made in the show-cause notice as the bills raised by the assessee was only for commission on sales and in the explanation to the show-cause notice the assessee had stated that the remuneration paid in the form of commission was not only on account of commission on sales but the consignment stockist undertook much wider responsibility including warehousing, distribution, sales promotion etc. and whether the same should have been adjudicated by the Tribunal being the last fact-finding authority? 2. We have heard Mr. Uday Bhattacharya, learned Senior Standing Counsel assisted by Ms. Banani Bhattacharya and Ms. Ekta Sinha, learned Advocates for the appellant and Mr. Rajeev Kumar Agarwal, Learned Advocate for the respondent. 3. The respondent is engaged in the manufacture of coal pitch, Naphthalene, HC Oil and Carbon Black and similar preparations falling under TSH 2708 1010, 2707 4040, 2707 9100 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated as commission on sales and, therefore, the Department was of the view that the Commission Agents apart from sale of the goods manufactured by the assessee have no role in respect of promotion of sales of the goods and thereby it cannot be treated as their input service and credit is not available to the respondent. The assessee s case in the reply to the show-cause notice was that the remuneration paid to the commission stockist in the form of commission was not only on account of commission on sales but they took wider responsibilities including warehousing, distribution, sales promotion and marketing activities for the respondent s products and focused on the buyer/ manufacturing industries to represent the respondent with regard to the quality of the product, competitive prices etc. Further, consignment stockist undertook advertisement campaign, participated in trade exhibition and other modes for promoting sale of the products manufactured by the respondent. The respondent referred to a sample agreement entered into with the commission stockist wherein there were conditions to say that the appointment of commission stockist is for warehousing, distribution and sale of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice appears to be the decision in the case of CCE, Ahmedabad-II Versus Cadila Healthcare 2013 (30) STR 3 (Guj) wherein it has been held that services provided by selling agents are not eligible input services. The respondent distinguished the said decision on facts as well as on the basis that services provided by consignment agents include sale promotion, warehousing and other services which are specifically included in the definition of input service as an input service. Further, it was submitted that in view of the conditions faced by the assessees across the country and credit being denied, an amendment was made in the CENVAT Credit Rules by adding an explanation under Rule 2(l) vide notification dated 03.02.2016, which states that for the purpose of Clause 2(l) sales promotion includes services by way of sale of dutiable goods on commission basis. By referring to the said explanation, it was submitted that in view of the same, the entire controversy for disallowing the credit on services provided by commission agents came to an end and the department has not raised any objection with regard to the availability of credit on the subject services for the period from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the reply to the show cause notice. The learned tribunal perused the agreement, took into consideration the definition of input service as defined under Rule 2(l) of the rules with effect from 01.04.2011 and held that the services under taken by the concerned agents for sales promotion are included in the definition of the input services and the very basis for the adjudicating authority to deny credit was by placing reliance on the decision in Cadila Heath Care Limited for denying credit. The Learned tribunal also perused the amendment made to the definition of input service by way of insertion of the explanation vide a notification dated 03.02.2016 and after taking note of the certain decisions of the tribunal, it was held that the explanation being in the nature of clarification has to be held to be retrospective and accordingly agreed with the submissions made on behalf of the respondent. Further the learned tribunal held that invoking extended period of limitation is not sustainable. 8. Mr. Bhattacharyya, learned standing counsel for the appellant vehemently contended that in the appeal before the tribunal, the correctness of the order of the adjudicating authority ought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicate that the commission agents were involved in the sales promotion activities, contrary to the case on hand where agreements were produced before the authority to show what is the nature of services rendered by those commission stockists. 10. Mr. Bhattacharyya referred to the sample invoices and submitted that in the invoices, it has been stated under the column description commission for sales . The correctness of such an identical submission made before the tribunal was tested and after considering all the facts, the terms and conditions of the agreement and the nature of services rendered by the commission stockist the tribunal recorded an independent finding that the activities of the commission stockist is towards sales promotion as well. Therefore, the reliance placed on the decision in the case of Ambika Overseas by the respondent assessee was well justified. Further, on and after the insertion of the explanation in Section 2(l) vide notification dated 03.02.2016, the position has become much clearer. The explanation seeks to clarify the intention of the legislature with a view to extend the benefit of credit on services of commission agent as was indicated in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is an element of sales promotion as sales promotion is a service. Thus, the conflict between the judgment and the circular is not as large as is perceived. Both the Board circular and case laws on the subject allow credit of input service, when the activity of the sales commission agent involves an element of sales promotion. 11. As could be seen from the above clarification, the decision in Cadila Health Care was also taken note of by the department and the position stood clarified that sales promotion would include services by way of sale of goods on commission basis. As pointed out by the Hon ble Supreme Court in Commissioner of Income Tax Versus Vatika Township Private Limited (2015) 1 SCC 1 that if a legislation confers the benefit on some persons but without inflicting the corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the object of the legislature, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. In Commissioner of Income Tax Versus Archean Granite Private Limited (2020) 117 Taxmann.com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l have to be allowed as input stage credit more particularly if the same forms a part of the price of final product of the assessee on which excise duty is paid. In other words, credit of input service must be allowed on expenditure incurred by the assessee which form a part of the assessable value of the final product. If the above is not done, as sought to be done by the department in the present case, it will defeat the very basis and genesis Cenvat i.e. value added tax. What follows from the above discussion is that credit is availed on the tax paid on the input service, which is advertisement and not on the contents of advertisements. Thus it is not necessary that the contents of the advertisements must be that of the final product manufactured by the person advertising, as long as the manufacturer can demonstrate that the advertisement services availed have an effect of or impact on the manufacture of the final product and establish the relationship between the input service and the manufacture of the final product. The manufacture thereby can avail the credit of the service tax paid by him. Once the cost incurred by the service has to be added to the cost, and is so ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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