TMI Blog2013 (8) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... - - Dated:- 24-5-2013 - MR.S.S. KANG AND MR.P.K. JAIN, JJ. For the Appellant: Shri J.C. Patel, Adv. For the Respondent : Shri S.K. Mall, Addl. Commissioner (A.R.) ORDER Per: S.S. Kang: Heard both sides. 2. The applicant filed this application for pre-deposit of duty of Rs.3,11,61,644/-, interest and penalty. The demand is confirmed after denying the credit of Service Tax paid on sales commission in respect of services provided by the commission agents. 3. The contention of the applicant is that the applicants paid the Service Tax in respect of the services of commission agents and availed the credit. The applicants also have been filing monthly returns regularly showing taking of credit. The applicants submitted that it is recently the Hon'ble High Court of Gujarat in the case of Cadila Healthcare Ltd. 2013 (30) STR 3 (Guj.), held in favour of the Revenue. Earlier, the decision of the Tribunal was in favour of the manufacturer and the Tribunal allowed the credit of Service Tax paid on the commission agent services. Applicant also submitted that the Hon'ble High Court of Punjab Haryana in the case of Ambika Overseas 2012 (25) STR 348 (P H), dismissed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble High Court of Gujarat in favour of Revenue. For better appreciation, we respectfully reproduce the relevant Para 5.2 of said decision. 5.2 Commission paid to the foreign agents : The assessee availed of CENVAT credit of Rs. 39,45,791/- towards commission paid to foreign agents. According to the assessee, out of the total amount paid as service tax, they had availed of CENVAT credit only on that part which was attributable to dutiable products manufactured in their plant only and that no CENVAT credit has been availed on exempted goods. It was contended that service tax paid on commission paid to commission agents for sale of final products is available as credit according to the inclusive part of the definition of input service, which includes services in relation to sales promotion. Reference was made to the definition of business auxiliary service as defined under Section 65(19) of the Finance Act, 1994 which lays down that business auxiliary service means any service in relation to (i) promotion or marketing or sale of goods produced or provided by or belonging to the client or (ii) promotion or marketing of service provided on behalf of the client and includes service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee supported the impugned order of the Tribunal by submitting that the assessee avails of services of commission agents for sale of its final products. The commission agents find buyers for the assessees goods and thereby promote the sales of the assessee s goods. The includes portion of the definition specifically mentions services used in relation to sales promotion. The service of commission agents is, therefore, covered by the definition of input service. Moreover, such service is received in relation to the assessee s business only and not for any other purpose. The same is, therefore, a service in relation to the activity relating to business which is also covered by the includes portion of the definition. It was argued that the show cause notice had proposed to deny CENVAT credit merely on the ground that the said service is a post-manufacturing activity and is not used directly or indirectly in the manufacture of final products, completely ignoring the includes portion of the definition. It was also submitted that the service tax paid to a commission agent for sale of final product would fall within the ambit of sales promotion which is a business auxiliary service and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading stamps, arranging demonstrations or exhibitions, setting up competitions with attractive prizes, temporary price reductions, door-to-door calling, telephone selling, personal letters etc. In the Oxford Dictionary of Business English, sales promotion has been defined as a group of activities that are intended to improve sales, sometimes including advertising, organizing competitions, providing free gifts and samples. These promotions may form part of a wider sales campaign. Sales promotion has also been defined as stimulation of sales achieved through contests, demonstrations, discounts, exhibitions or tradeshows, games, giveaways, point-of-sale displays and merchandising, special offers, and similar activities. The Advanced Law Lexicon by P. Ramanatha Aiyar, third edition, describes the term sales promotion as use of incentives to get people to buy a product or a sales drive. In the case of Commissioner of Income-tax v. Mohd. Ishaque Gulam, 232 ITR 869, a Division Bench of the Madhya Pradesh High Court drew a distinction between the expenditure made for sales promotion and commission paid to agents. It was held that commission paid to the agents cannot be termed as expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord, as noted above to indicate that such commission agents were involved in the activity of sales promotion as explained in the earlier portion of the judgement, in the opinion of this court, the claim of the assessee was rightly rejected by the Tribunal. Under the circumstances, the adjudicating authority was justified in holding that the commission agent is directly concerned with the sales rather than sales promotion and as such the services provided by such commission agent would not fall within the purview of the main or inclusive part of the definition of input service as laid down in Rule 2(l) of the Rules. As regards the contention that in any event the service (ix) rendered by a commission agent is a service received in relation to the assessee s activity relating to business, it may be noted that the includes part of the definition of input service includes activities relating to the business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security. The words activities relating to business are followed by the words such as. Therefore, the words such as must be g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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