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2023 (2) TMI 139 - AT - Service Tax
Recovery of irregularly availed CENVAT Credit along with interest and to impose penalty - input service or not - Service Tax paid on Commission paid to different commission agents - HELD THAT:- It has been observed that during 01.04.11 to 31.03.2015, the appellant had taken CENVAT Credit of input service on sales commission paid to different agents. Rule 2(l) of the CENVAT Credit Rules, 2004 defines input service. With effect from 01.04.2011, the definition of input service got narrowed and the expression ‘activities related to business’ was omitted. Department referred to Cadila judgement to confirm the demand, as sales commission is not covered in the inclusive part of the definition of Input Service.
The Appellant rightly referred to Circular No. 943/4/2011-CX, dated 29.04.2011 wherein department unambiguously accepted the legality of availment of credit on sales commission - it was held that The definition of input services allows all credit on services used for clearance of final products upto the place of removal. Moreover activity of sale promotion is specifically allowed and on many occasions the remuneration for same is linked to actual sale. Reading the provisions harmoniously it is clarified that credit is admissible on the services of sale of dutiable goods on commission basis.
The sales commission has a direct nexus with the sales, which in turn is related to the manufacture of the products. If there is no sale, there would not be any need to manufacture the products. Be that so as it may, to increase the manufacturing activity an encouragement is being given by way of sales commission for achieving increased sales - Hon’ble High Court of Punjab & Haryana in the case of COMMISSIONER OF CENTRAL EXCISE, LUDHIANA VERSUS AMBIKA OVERSEAS [2011 (7) TMI 980 - PUNJAB & HARYANA HIGH COURT], had clearly held that the sale and manufacture are directed inter-related and the commission paid on sales needs to be accounted for as services related to sales promotion.
The impugned order cannot be sustained and is, therefore, set aside - Appeal allowed.