2017 (5) TMI 1487 - AT - Central Excise

CENVAT credit - input services - sales commission - whether the sales commission paid to persons who procured the sale orders for the appellant whether the same is available as input service tax for the appellant-assessee? - Held that - the issue is no longer resintegra and Division Bench of this Tribunal in Essar Steel India Limited vs. CCE & ST 2016 (4) TMI 232 - CESTAT AHMEDABAD wherein it has been held that appellant appointed marketing agent in overseas for market information to export market feedback and developing clients for enhancing market share. The agreement with the overseas agents was in the nature of sales promotion agreement. The agents were paid commission to be construed on the basis of exports sale. Considering the explanation to Rule 2 (l) CC Rules 2004 inserted by N/N. 02/2016 CE(NT) dated 3 February 2016 providing/explaining that sales promotion includes services by way of sale of dutiable goods on commission basis - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether sales commission paid to persons procuring sale orders is available as input service tax for the appellant-assessee.

Analysis:
The appeal before the Appellate Tribunal CESTAT, ALLAHABAD revolved around the eligibility of sales commission paid to individuals procuring sale orders as input service tax for the appellant. The show cause notice was issued based on the appellant taking Cenvat Credit on commission paid to sugar selling agents. The appellant argued that the issue had been settled by a Division Bench in Essar Steel India Limited vs. CCE & ST, where it was established that the commission paid to overseas marketing agents for sales promotion activities qualified as input services. This determination was supported by the explanation to Rule 2(l) CC Rules 2004, inserted by a notification in 2016, which clarified that sales promotion includes services involving the sale of dutiable goods on a commission basis. The Tribunal also referenced a circular from the Central Board of Excise dated 2011, stating that when an explanation is inserted in a rule, it is declaratory in nature and effective retrospectively. The Tribunal further cited a ruling from the Hon'ble Punjab & Haryana High Court and the Hon'ble Supreme Court, emphasizing that explanations are meant to clarify the meaning and intent of a rule or section, sometimes with retrospective effect.

The Revenue, represented by the learned AR, relied on the impugned order, but the Tribunal, following the precedent set in Essar Steel India Limited, concluded that the issue was in favor of the appellant. Therefore, the appeal was allowed, and the impugned order was set aside. The appellant was deemed entitled to consequential benefits as a result of the Tribunal's decision. The judgment was dictated and pronounced in court by Anil Choudhary, the Judicial Member of the Tribunal.