CESTAT, NEW DELHI BENCH
DSCL Sugar
v.
Commissioner of Central Excise, Lucknow*
MS. ARCHANA WADHWA, JUDICIAL MEMBER
FINAL ORDER NO. 803 OF 2011-SM(BR)(PB)
STAY ORDER NO. S/798 OF 2011 - SM (BR) (PB)
APPLICATION NO. E/STAY/941 OF 2011 - SM (BR)
APPEAL NO. E/778 OF 2011-SM (BR)
NOVEMBER 1, 2011
Rule 2(l) of the Cenvat Credit Rules, 2004 - Cenvat credit - Input service - Assessee, for sale of its final product, availed services of commission agents and paid service tax on said services - Whether assessee was entitled to avail Cenvat credit of service tax so paid - Held, yes [Para 5] [In favour of assessee]
Circulars & Notifications : Circular No.
943/4/2011-CX, dated 29-4-2011
FACTS
The assessee was engaged in the manufacture of sugar. For
sale of its final product, it availed the services of the commission
agent, and was paying service tax on the said services under the
category of business auxiliary services. The assessee availed the Cenvat
credit of service tax so paid by it. Revenue
was of the view that assessee was not entitled to avail Cenvat credit
inasmuch as commission agent's services
could not be considered to be eligible Cenvatable services. Accordingly
after issue of show-cause notice demand was confirmed on the assessee. Said demand was upheld by the Commissioner (Appeals).
On appeal:
There are catena of judgments laying down that the
service tax paid on the commission agent's services is available as
Modvat credit. As such, it was held that the impugned orders denying
such credit are not sustainable. [Para 5]
Apart from that Circular No. 943/4/2011-C.X., dated 29-4-2011
issued by the Board clarified that even after the deletion of
expression 'activities related to business' from the definition of input
services, the credit of service tax paid on the sales promotion
activities and on the services of sales of dutiable goods on commission
basis would be admissible as credit. [Para 6]
The impugned orders was to be set aside and the appeal was to be allowed. [Para 7]
CASE REVIEW
Cadila Healthcare Ltd. v. CCE [2009] 23 STT 224 (Ahd.
- CESTAT); Lanco Industries Ltd. v. CCE [2009] 22 STT 380 (Bang. - CESTAT) and CCE v. Bhilai Auxiliary Industries [2009]
21 STT 474 (New Delhi - CESTAT) (para 7) followed.
CASES REFERRED TO
CCE v. Bhilai Auxiliary Industries [2009] 21 STT 474 (New Delhi - CESTAT) (para 4), Chemplast Sanmar Ltd. v.
CCE, LTU [2010] 29 STT 289 (Chennai - CESTAT) (para 4), Metro Shoes (P.) Ltd. v. CCE [2007] 10 STT 462 (Mum - CESTAT) (para 5), CCE v. Abhishek Industries Ltd. (Stay order No. 1106 of 2007, - Ex (PB), dated 23-10-2007) (para 5), Lanco Industries Ltd. v. CCE [2009] 22 STT 380 (Bang - CESTAT) (para 5) and Cadila Healthcare Ltd. v. CCE [2009] 23 STT 224 (Ahd. - CESTAT) (para 5).
Kapil Vaish for the Appellant. S.K. Bhaskar for the Respondent.
ORDER
1. After dispensing with the condition of pre-deposit
of duty of Rs. 4,09,940 and penalty of identical amount, I proceed to
decide the appeal itself inasmuch as the disputed issue stands decided
in favour of the appellants by the precedent decision of the Tribunal.
2. After hearing both sides, I find that the
appellants are engaged in the manufacture of sugar. For sale of their
final product, they availed the services of the commission agent, and
are paying Service tax on the said services under the category of
Business Auxiliary Services. They availed the Cenvat credit of Service
tax so paid by them on the services of commission agent. Revenue is of
the view that they are not entitled to avail Cenvat credit inasmuch as
commission agent services cannot be considered to be eligible cenvatable
services. Accordingly, proceedings were initiated against the
appellants by way of issuance of show cause notice dated 25-9-2009 raising demand of duty for the period 1-4-2007 to 30-8-2009.
The show cause notice stand culminated into the impugned order passed
by the original adjudicating authority and upheld by the Commissioner (Appeals). Hence, the present appeal.
3. The short question required to be decided is as
to whether the service tax paid on commission agent services is
available as Cenvat credit to the appellants by treating the same as
input services in terms of Rule 2(l) of Cenvat Credit Rules, 2004. The lower authorities have held that (inasmuch
as the said activities are post manufacturing and post clearance
activities, they do not satisfy the definition of inputs services. On
the other hand, it is the appellants contention that services of
commission agent are, in fact, received prior to the clearance of goods,
and it is based upon the orders procured by them, the goods were
cleared from their factory. As such, the Revenue's stand that the same
are related to post clearance activities cannot be upheld.
In any case, submits the learned advocate that there are
number of Tribunal's decision laying down that such activities have
direct nexus with the business activities of the assessee and as such
have to be treated as input services.
4. I find from the impugned order of the Commissioner (Appeals)
that it is accepted fact that there are different orders of the
Tribunal adopting two different views. He has accepted that the
Tribunal's decision in the case of CCE v. Bhilai Auxiliary Industries [2009] 21 STT 474 (New Delhi -
CESTAT) holds commission agent services as eligible input services for
the purpose of modvat, though he has preferred to rely upon the Single
Member Bench decision in the case of Chemplast Sanmar Ltd. v. CCE LTU [2010] 29 STT 289 (Chennai - CESTAT) laying to the contrary.
5. I find that Tribunal's decision in the case of Bhilai Auxiliary Industries (supra) stands passed before the decision in the case of Chemplast Sanmar Ltd. (supra). The said judgment in the case of Bhilai Auxiliary Industries (supra) relies upon the Division Bench judgment of the Tribunal in the case of Metro Shoes (P.) Ltd. v. CCE [2007] 10 STT 462
(Mum. - CESTAT) as also in the case of CCE v. Abhishek Industries Ltd. [2008] stay order No. 1106 of 2007-Ex (PB), dated 23-10-2007 and the decision in the case of Chemplast Sanmar Ltd. (supra) has not taken note of either Bhilai Auxiliary Industries case (supra) decision or the Division Bench judgment in the case of Metro Shoes (P.) Ltd. case (supra) I also note that there are another Division Bench judgment in the case of Lanco Industries Ltd. v. CCE [2009] 22 STT 380 (Bang - CESTAT) laying down, after taking note of the Division Bench judgment in the case of Metro Shoes (P.) Ltd. (supra)
that Service tax paid on commission agent in respect of sales made
through such agent is admissible for Cenvat credit. It seems that the
said Division Bench judgment in the case of Lanco Industries Ltd. (supra) escaped the attention of the Single Member Bench deciding the issue in the case of Chemplast Sanmar Ltd. (supra). Further, the Tribunal's decision in the case of Cadila Healthcare Ltd. v. CCE [2009] 23 STT 224 (Ahd. -
CESTAT) also held that the Foreign Commission agent service for sale
promotion, are input services and credit on Service tax paid on the same
is admissible. As such, I note that there are catena of judgment laying
down that the Service tax paid on the commission agent services is
available as modvat credit. As such, I hold that the impugned orders
denying such credit are not sustainable.
6. Apart from the decisions as discussed above, I also take note of a recent Circular No. 943/4/2011-C.X., dated 29-4-2011
issued by the Board clarifying that even after the deletion of
expression "activities related to business" from the definition of input
services, the credit of Service tax paid on the sales promotion
activities and on the services of sales of dutiable goods on commission
basis would be admissible as credit. As such, it is the contention of
the learned advocate that even after the activities related to business,
stand deleted from the definition of inputs credit as per the Board's
Circular, the Service tax paid on commission on agent services would be
available. However, he clarifies that period involved in the present
case is prior to the amendment to the definition of input services, the
precedent decision of the Tribunal would cover the disputed issue in his
favour.
7. I had already held that impugned order is not
sustainable on merits. Accordingly, the impugned orders are set aside
and appeal is allowed with consequential relief.
8. Stay petition as also appeal gets disposed of in the above manner.
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