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TMI Blog2025 (4) TMI 1285X X X X Extracts X X X X X X X X Extracts X X X X ..... Freight, Commission on Sales, Renting of Immovable Property, Advertisement, Consultancy, Security Services, etc. During verification caused by department, it appeared that the Appellant during February 2013, had availed ineligible credit of Service Tax paid on (i) outward freight beyond place of removal, (ii) Commission on sales paid beyond the place of removal in respect of sales effected in show rooms and (iii) Commercial rent paid to the premises of sales outlets, in contravention of Rules 3 & 4 of CCR. A Statement of Demand No. 15/2014 dated 21.02.2014 was issued to the Appellant seeking to disallow the ineligible Cenvat Credit and to recover the same under Rule 14 of CCR read with Section 11A(1) ibid along with applicable interest, besides proposing to impose penalty under Rule 15(1) ibid. The adjudicating authority confirmed the proposals put forth and imposed penalty. Being aggrieved, the Appellant has filed the present appeal before this forum. 3.1 The Ld. Counsel Mr. M. Karthikeyan representing the Appellant reiterated the grounds of appeal and submitted that the term 'Input Service' as defined under Rule 2(l) of the Cenvat Credit Rules 2004, covers any service which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of goods which was in the nature of promotion of sales of the said goods and placed reliance on the CBEC Circular No. 943/04/2011 from the F.No. 354/73/2011 - TRU dated 29-04-2011 wherein it was clarified that the credit is admissible on the services of sale of dutiable goods on commission basis. The Ld. Counsel also placed reliance on the decision of the Tribunal, Delhi in the case of M/S. Ultratech Cement Ltd. Versus CCE, Jodhpur [2017 (12) TMI 882 - CESTAT New Delhi] wherein while analyzing the above said circular had held that there was no bar on availment of Cenvat credit on sales promotion service by way of sale of dutiable goods on commission basis. 3.4 The Ld. Counsel submitted that the CBIC vide Notification No. 02/2016CE(NT) dated 03.02.2016 had amended the definition of input service by adding an explanation which mentioned that the sales promotion included services by way of sale of dutiable goods on commission basis in line with the above said clarification dated 29-04-2011. It was pointed out that the said amendment being clarificatory in nature and any beneficial amendment should be applied retrospectively and hence the appellant would be eligible for the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was urged that the Input Credit on rent paid could be said to be validly taken, relying on the following judgements: - i. Tally Solutions Pvt. Ltd. Versus Commissioner of Central Excise [ 2016 (8) TMI 292 - CESTAT Bangalore], ii. Navabharat Ventures Ltd. Versus CCT, Vishakapatnam [2018 (9) TMI 739 - CESTAT Hyderabad]. iii. CCE, Delhi-III Versus M/s. Mark Exhaust Systems Ltd. [2015 TMI 1472 - CESTAT New Delhi]. iv. LG Electronics India Pvt. Ltd. CCE, Pune [2013 (12) TMI 841-CESTAT Mumbai] v. Cantabil Retail Limited & Others Vs. CCE, Delhi-I [2017 (9) TMI 205-CESTAT, New Delhi] 4.1 The Ld. Authorized Representative Mr. Anoop Singh for the Department reiterated the findings in the impugned order and submitted that the Appellant had availed ineligible credit which was liable to be recovered under the CCR and penalty imposed on the Appellant is justified. 4.2 He has contended that the place of removal has to be determined as Factory Gate on the basis of analysis of the provisions of the Act ibid and Sales of Goods Act, 1930. The Ld. AR has relied upon the case of Commissioner of Central Excise and Service Tax Versus Ultra Tech Cement Ltd. [2018 (9) G.S.T.L. 337 (S.C.)], wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2004 enabling 'goods transport agency service' to be availed of till 'place of removal' and the consequential decision of the Hon'ble High Court of Karnataka affirmed by the Hon'ble Supreme Court in Commissioner of Central Excise, Belgaum Vs. Vasavadatta Cements Ltd. [2018 (3) TMI 993 - SUPREME COURT] did not exclude the possibility of such outward transport included in the assessable value from being eligible for availment of credit when circumstances so warranted. Evaluation of the submissions of the appellant on this score had not been undertaken by the original authority. The matter has been remanded to the Original Authority for fresh decision keeping all the issues open. 5. We have heard both sides and carefully considered the rival submissions and evidences on record. 6. The issues which arise for determination are: - i. Whether the assessee is eligible to avail input service credit on outward freight from factory to sales outlets? ii. Whether the Input Credit availed by the Appellant on sales commission paid to the franchisee for marketing and selling the products manufactured by the appellants is allowable or not? And iii. Whether the Appellant is eligible to ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in a case where clearances of goods are against FOR contract basis, the authority needs to ascertain the 'place of removal' by applying the judgments of the Supreme Court in Commissioner Central Excise, Mumbai-III Versus M/s. Emco Ltd. [2015 (8) TMI 200 - SUPREME COURT] and Commissioner, Customs and Central Excise, Aurangabad Versus M/s. Roofit Industries Ltd. [2015 (4) TMI 857 - SUPREME COURT], the decision of the Karnataka High Court in Bharat Fritz Werner Ltd. and Mapal India Private Limited Versus The Commissioner of Central Tax, Bangalore [2022 (7) TMI 352 - KARNATAKA HIGH COURT], and the Circular dated 08.06.2018 of the Board to determine the admissibility of CENVAT credit on the GTA Service upto the place of removal. The relevant portion of the Large Bench decision is extracted for easy reference as below: - "31. The Karnataka High Court in Bharat Fritz Werner considered the judgment of the Supreme Court in Ultratech Cements and also the Circular dated 08.06.2018 of the Board and held as follows: "13. The CESTAT, in the case of Bharat Fritz Werner Ltd. v. C.C., C.E. & S.T-Commissioner of Central Tax [CEA 56/2019], has recorded in paragraph No. 5 that as per the purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to the facts of this case and these appeals merit consideration. Hence, the following : ORDER (a) The questions of law framed by this Court in CEAs No. 56/2019 and 71/2019 are answered in favour of the assessee holding that the Tribunal's view is unsustainable in law; (b) CEA No. 56/2019 is allowed and impugned order vide Final Order Nos. 21960-21962/2018, dated 31-12-2018 passed in Appeal Nos. E/21756/2017-SM, E/21757/2017-SM and E/21758/2017-SM are set aside; and (c) CEA No. 71/2019 is allowed and impugned order vide Final Order No. 20224/2019, dated 27-2-2019 passed in Appeal No. E/20302/2018-SM is set aside." 32. The interpretation of the judgment of the Supreme Court by the High Courts as above throws light on the controversy. The Rajasthan High Court in Mangalam Cements simply referred to the judgment of the Supreme Court without analyzing its applicability in the context of the case in denying the credit on GTA service. The Supreme Court set aside the said judgment and remanded the case to examine the facts in the light of the judgment. On the other hand, in the judgment of the Karnataka High Court in Bharat Fritz Werner, all aspects of the case ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Franchisee. Besides, as per Clause 10 of the agreement, the insurance coverage for showroom stock is taken by the Appellant. We also find that the definition of 'place of removal' contained in Section 4(3)(c) of Central Excise Act, 1944 includes the premises of a consignment agent or any other place from where the excisable goods are sold. Under the above circumstances, we are of the view that the Franchisee showroom is the place of removal and therefore the credit availed on outward GTA services for movement of goods from the appellant's unit to Franchisee premises on stock transfer basis is eligible as it is for transportation of goods up to the place of removal. 9.3 The Ld. Authorized Representative's reliance on the decision of CESTAT Mumbai in the case of LG Electronics India Pvt. Ltd. Vs. Commissioner of Central Excise, Pune [2023 (12) TMI 841 - CESTAT MUMBAI] is only a remand order to ascertain the 'place of removal' on the basis of the facts obtaining in that case. The question that was answered in the case of Commissioner of Central Excise and Service Tax Vs. Ultra Tech Cement Ltd. [2018 (9) GSTL 337 (SC)] (in para 4.2 above) relates to eligibility of CENVAT credit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Used by a provider or taxable service for providing an input service: Or (ii) Used by the manufacturer, whether directly or indirectly, in or in relation to the manufacturers of final products and clearance of final products up to the place of removal And includes services used in relation to setting up, modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, activities relating to business such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation up to the place of removal.' The impugned order has not discussed the kind and nature of the individual services. Yet, the question 'whether the "categories of input services" claimed by the appellant (Service Tax paid on renting charges, freight and cartage, postage and courier charges, security, legal and professional charges, advertising, insurance, software & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the nature of these services, it is evident that all the services are essential in running manufacturing business of the appellants and in view of the inclusive clause stipulated under Sub-rule (ii) of Rule 2(I) of the Cenvat Credit Rules, 2004, all the above mentioned services can certainly be attributed to have been termed as activities relating to the business of the appellants and used prior to the clearance of the subject goods to the ultimate consumer from the final place of removal." 8. In the appeals, the Revenue contended that the services availed at retail outlets cannot be considered for credit to the main appellate assessee. The Revenue contended that these services used in retail outlets had no remote connection in the manufacture of ready-made garments. We note that the original authority did not appreciate the legal scope of Rule 2(l) of the Cenvat Credit Rule, 2004. The Revenue presumed that the services should be in or in relation to manufacture of ready-made garments, whereas Rule 2(l) clearly talks about services used by manufacturers, whether directly or indirectly in or in relation to the manufacture of final products and clearance of final products up to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent parts. Presumably, the first part i.e. used by provider of taxable service for providing an output service "is not an issue in this case. The second part of the definition used by the manufacturer.....from place of removal" is being strongly contested by both sides. On a plain reading of the second part of the definition, we find that any input service used by the manufacturer, whether directly or indirectly in or in relation to the manufacturer of final product and clearance of final product from the place of removal, stands eligible for availing as credit. It is also undisputed that the sale of said shoes take place from the said showrooms only and did not take place from the factory premises. If that be so, it has to be accepted that the show rooms which are belonging to the appellant herein, have to be considered as place of removal. The services utilised by the appellant till the place of removal and the service tax paid thereon are to be considered as services utilised by him for the manufacture of final product and the clearance of the same from the place of removal. This would indicate that the services which are rendered by various service providers during the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating, share registry, and security, inward transportation of inputs or capital goods and outward transportation up to the place of removal." 11. On going through the said provisions, we find that the inclusive part of the provisions of Rule 2(l) of Cenvat Credit Rules, 2004 provides for availment of Cenvat credit on sales commission paid to franchisees. The appellant had incurred expenses/paid commission to the franchisees for display of the products and effecting the sale of goods which was attributable to the promotion of sales of the said goods. The CBEC Circular No. 943/04/2011 clarified that the credit would be admissible on the services of sale of dutiable goods on commission basis. The Ld. Counsel placed reliance on the decision of the Tribunal in the case of M/s. Ultratech Cement Ltd. Versus CCE, Jodhpur [2017 (12) TMI 882 - CESTAT New Delhi] wherein the Tribunal relying on the above said circular had held that there was no bar on availment of Cenvat credit on sales promotion service by way of sale of dutiable goods on commission basis. In the case of Essar Steel India Ltd. Versus Commissioner of C.EX. & S.T., Surat-I [2016 (42) S.T.R. 869 (Tri. - Ahmd.)], the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld to its buyer through the Depot situated outside the factory premises. Since the duty paid vehicles were removed to the depot, from where the same were sold to the customers, such activity squarely falls under the definition of "input service" under the category of "storage up to the place of removal", itemised therein. In the above referred cases, the Tribunal has allowed the services availed for the Go-down/Depot by holding that the services have nexus with the ultimate manufacturer of final product" 12.2 Similarly in the case of Tally Solutions Pvt. Ltd. Versus Commissioner of C.EX., Bangalore-I [2017 (47) S.T.R. 148 (Tri. - Bang.)], the Tribunal held as follows: - "5. In this case, I find that the credit of service tax paid on immovable property rent on sales office has been denied on the ground that the same has been availed after the place of removal and therefore, is not covered under the definition of 'input service'. Further submission of the learned CA is that they are actually in the sales promotion activity such as conducting maintenance of software, providing after sale service and also making efforts to sell the product and this sales promotion is specifically co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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