TMI Blog2015 (8) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... credit taken with respect to commission paid to such distributors/ consignment stockists is not admissible. The credit so taken is required to be paid by the appellant with interest and appeal with respect to CENVAT credit on services of Sales Commission, availed by the appellant, is rejected. So far as imposition of penalties upon the appellant is concerned, it is observed that the period involved in the present proceedings is from July 2012 to March 2013. The judgment delivered by Hon'ble Gujarat High Court in the case of Cadila Healthcare Limited vs. CCE Ahmedabad (2013 (1) TMI 304 - GUJARAT HIGH COURT) is dated 07.11.2012 which settled the dispute of interpretation of admissibility of CENVAT credit, inter-alia, with respect to sales commission paid by the assessees. As the issue involved was disputable, therefore, no penalty under Rule 15(1) of the Cenvat Credit Rules, 2004 is imposable. The appeal filed by the appellant with respect to penalty is thus required to be allowed. - Decided partly in favour of assessee. - Appeal No. : E/13399/2014 - ORDER No. A/10794 / 2015 - Dated:- 12-6-2015 - Mr. H.K. Thakur, J. For Appellant : Shri Willingdon Christian, Advocate F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to selling of goods of the appellant or not. Appellant is of the view that sales promotion activities are carried out as per Clause 13 and 17 of the contract entered between the appellant and the distributors/ consignment stockists. That their case is squarely covered by the judgment in the case CCE, Ahmedabad vs. Cadila Healthcare Limited (supra). On the other hand, Revenue is of the view that no sales promotion activities are undertaken by the distributors/ consignment stockists of the appellant and therefore, no CENVAT credit is admissible as per law laid down by the Hon'ble Gujarat High Court in the case of CCE, Ahmedabad-II vs. Cadila Healthcare Limited. 5. Before giving observation on the arguments raised by either side, it will be relevant to reproduce Clause 7,13 and 17 of the one contracts dated 13.02.2012 entered between the appellant and M/s. Shree Shyam Industries:- 7.0. Company shall pay Consignment Stockist the service charges at the following rates or as may be decided by Company from time to time on the Exfactory sales value of goods delivered, by way of issuing separate credit note provided that Consignment Stockist have fulfilled all other obligations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by the appellant to its distributors/ consignment stockists for undertaking such activity. In this regard, law laid down by the Hon'ble High Court in the case of Cadila Healthcare Limited vs. CCE, Ahmedabad (supra), as per Para 5.2 is relevant and is reproduced below:- 5.2?Commission paid to the foreign agents : The assessee availed of CENVAT credit of ₹ 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 prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the ambit of the expression input service as envisaged under Rule 2(l) of the Rules. (iv)?On the other hand, the learned counsel for the assessee 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 assessee s goods and thereby promote the sales of the assessees 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... designed to boost the sales of a product or service. It may include an advertising campaign, increased PR activity, a free-sample campaign, offering free gifts or trading 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 vs. Mohd. Ishaque Gulam, 232 ITR 869, a Division Bench of the Madhya Pradesh High Court drew a di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt has examined whether the services of foreign agent availed by the assessee can be stated to services used as sales promotion. In the absence of any material on record, 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. (ix) As regards the contention that in any event the service 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 network ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012 (25) S.T.R. 348 (P H)]. Insofar as this issue is concerned, the question is answered in favour of the revenue and against the assessee. 7. In the light of the interpretation made by the jurisdictional High Court, it is held that activities undertaken by the distributors/ consignment stockists of the appellant are purely distribution/ sales and has no element of sales promotion and, therefore, CENVAT credit taken with respect to commission paid to such distributors/ consignment stockists is not admissible. The credit so taken is required to be paid by the appellant with interest and appeal with respect to CENVAT credit on services of Sales Commission, availed by the appellant, is rejected. 8. So far as imposition of penalties upon the appellant is concerned, it is observed that the period involved in the present proceedings is from July 2012 to March 2013. The judgment delivered by Hon'ble Gujarat High Court in the case of Cadila Healthcare Limited vs. CCE Ahmedabad (supra) is dated 07.11.2012 which settled the dispute of interpretation of admissibility of CENVAT credit, inter-alia, with respect to sales commission paid by the assessees. As the issue involved was d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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