2017 (12) TMI 438 - AT - Central Excise

CENVAT credit - input services - sales commission - whether the sales commission paid to agents would fall under the scope of sales promotion mentioned under the inclusive part of the definition of input service prescribed under Rule 2(l) of CCR 2004? - Held that - the present appeal is disposed of with the liberty to both sides to approach the Tribunal soon after the verdict of the Hon ble High Court in the pending Appeal against the Division Bench judgment of this Tribunal in Essar Steel India Ltd. s case 2016 (4) TMI 232 - CESTAT AHMEDABAD filed by the Revenue where it was held that even for the period prior to 03.02.2016 the service tax paid on sales commission has been held to be admissible to CENVAT credit - appeal disposed off.

Summary

Issues involved:
Eligibility of CENVAT credit on service tax paid on sales commission.

Analysis:
The principal issue in the present appeal before the Appellate Tribunal CESTAT Ahmedabad pertains to the eligibility of CENVAT credit on service tax paid on sales commission. The matter had been previously addressed by the Hon'ble Gujarat High Court in cases such as C.C.E. Vs. Cadila Healthcare Ltd. and Astik Dyestuff Pvt. Ltd. The Gujarat High Court, in its judgments, emphasized that sales commission paid to agents does not qualify as sales promotion under the definition of 'input service' as per Rule 2(l) of the Cenvat Credit Rules, 2004. The High Court also highlighted the importance of its jurisdictional judgment over circulars and opinions from other High Courts. Subsequently, an explanation was added to the definition of 'input service' through Notification No.2/2016 CE(NT) dated 03.02.2016, which was interpreted by a Division Bench of the Tribunal as having retrospective application, allowing service tax paid on sales commission to be eligible for CENVAT credit even before the notification date.

The Revenue, dissatisfied with the Tribunal's decision, filed a Civil Appeal before the Hon'ble High Court of Gujarat challenging the retrospective application of the notification. The Tribunal, acknowledging the pending appeal before the High Court and the importance of the High Court's decision on the matter, decided to defer its decision on the issue until the High Court's verdict is issued. This approach was consistent with a previous case where the Tribunal disposed of the matter, granting liberty to approach the Tribunal after the higher forum's decision. The present appeal was similarly disposed of, allowing both parties the liberty to approach the Tribunal post the High Court's decision, with no recovery or refund actions to be taken during this period.

In conclusion, the Appellate Tribunal's judgment reflects a cautious approach in deferring a decision on the eligibility of CENVAT credit on service tax paid on sales commission until the Hon'ble High Court of Gujarat provides clarity on the matter, ensuring compliance with the High Court's jurisdictional rulings and maintaining the status quo regarding recovery and refunds.