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Tale of 3 territories 1. non-taxable the state of Jammu & Kashmir; 2. normally taxable rest of India except Gujarat & Jammu & Kashmir; 3. differently taxable Gujarat alone.

Service Tax - By: - Subhash Modi - Dated:- 21-10-2015 Last Replied Date:- 24-10-2015 - Denial in Gujarat alone of cenvat credit of tax paid on certain input service viz. Service Tax paid on the services of a foreign/domestic sales commission agents for procuring orders for the goods sold by the registered manufacturer - a taxable service as well as input service (up to 30-09-2014). Sales commission agents provide services as promoters and canvassers of orders for the sale of excisable and dutiab .....

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agent meet the prospective customer and explain personally about the product, its advantages, how the product is best when compared to other brands and as a result he enriches the awareness of the product and also enrolls or convinces the customer to accept the product and to go for such product. Thus, this activity is to be considered as an 'advertisement' in the form of personal contacts with the customer. c) Normally, the selling company advertise their products in Television, Media, .....

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er to the company and thereby helps both the company and the Government. The manufacturer of goods pays commission to such an agent on post manufacturing and actual sale basis i.e. when revenue by way of excise (and other indirect taxes) is consequent to his efforts as an agent gets generated. For the manufacturing company higher volume of sales are achieved and thereby the Government also gets more Cenvat Duty. Thus, the sale commission agent not only renders direct service to the manufacturer .....

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n agent but does not include any information technology service and any activity that amounts to manufacture within the meaning of clause (f) of Section 2 of Central Excise Act, 1944. Explanation - For the removal of doubts, it is hereby declared that for the purposes of this clause, (a) Commission Agent means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while acting on .....

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e services as a commission agent; for removal of doubts and for the purpose of the said clause i.e. 65(19)(i) and (ii), commission agent has been explained in detail vide Explanation (a) (i) to (iv) and said Explanation clearly explains that Commission Agent is one who acts on behalf of another person and causes sale or purchase of goods. To sum up, by statutory definition it is more than abundantly clear and unambiguous that the services of a commission agent who causes sale of goods is include .....

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promotion and sale of goods includes the services of a commission agent and has been defined in the Finance Act, 1994 - without doubt. The CCR, 2004 Rule 2 (t) reads as follows: (t) words and expressions used in these rules and not defined but defined in the Excise Act or the Finance Act shall have the meanings respectively assigned to them in those Acts. The inclusive portion of the definition of the term 'input service' vide CCR, 2004 Rule 2(l) includes the words 'sales promotion&# .....

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s including the services of a commission agent will also be the meaning assigned to the words 'sales promotion' used in the definition part of the expression 'input service' in CCR, 2004. It follows that the CCR, 2004 had in itself the meaning of 'sales promotion' by partaking it from the FA, 1994. It was, therefore, never required that the meaning of the words 'sales promotion' used in CCR, 2004 Rule 2(l) inclusive definition was to be fathomed out from other sou .....

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2011 i.e. pre-and post removal of the phrase 'activities relating to business such as' from the CCR, 2004 Rule 2(l) definition. The words 'advertisement' or 'sale promotion' were at all the times pre- or post 01-04-2011 before/after the removal of the phrase 'activities relating to business such as' and the removal of the said phrase from the said input services definition did not change or affect the meaning of the word sales promotion as it was specifically alwa .....

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t of service tax paid on commission payable to agents even it was paid on sale of goods, was allowed. The said para 5 is reproduced below: 5 Is the credit of Business Auxiliary Service (BAS) on account of sales commission now disallowed after the deletion of expression activities related to business ? The definition of input services allows all credit on services used for clearance of final products up to the place of removal. Moreover activity of sale promotion is specifically allowed and on ma .....

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able as credit being an input service. The Hon. High Court on 07-11-2012 18 months after issue of the said Circular pronounced in the Cadila tax appeal [Commissioner of C. Ex., Ahmedabad-II Versus Cadila Healthcare Ltd. - 2013 (1) TMI 304 - GUJARAT HIGH COURT - that credit of tax paid on services of a commission agent is not available as his activities are not within the definition of 'sales promotion' qua the dictionaries and other resources meaning. The Hon. High Court after stating th .....

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t had not dealt with CCR, 2004 Rule 2(t) to determine whether the statutory definition of BAS, i.e. any service in relation to promotion or marketing or sale of goods which includes the services of a commission agent, is also the definition of the words 'sales promotion' used in CCR, 2004 Rule 2(l) or not and therefore the Commissioner could or could not have preferred the Tax Appeal in the face the binding statutory definition under said Section 65(19) read with the CCR, 2004 Rule 2(t) .....

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animity in bringing to the notice of the Hon. High Court the existence of the Circular and withdrawing his Tax Appeal on that ground. The statutory text and the statutory definition shall prevail and have primacy over dictionary meaning as laid down judgments/decisions in the cases: 1) Collector of CEX v/s. Parle Exports (P) Ltd - 1988 (11) TMI 108 - SUPREME COURT OF INDIA and 2) Sharpmax Engineers v/s. Collector Of Central Excise, Rajkot 1994 (5) TMI 112 - CEGAT, NEW DELHI. The Hon. Gujarat Hig .....

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virtue of CCR, 2004 Rule 2(t) which was not at all discussed and analysed nor the Circular No. 943/04/2011-CX dated 29.04.2011 which escaped notice. In an identical subsequent Tax Appeal before the Hon. Gujarat High Court in the case: Astik Dyestuff Pvt. Ltd. Versus Commissioner of C. Ex. & Customs [2014 (1) TMI 776 - GUJARAT HIGH COURT ] though the Appellant-Assessee had drawn the Hon. Court s attention to the said circular and argued that the Department cannot go against the Circular; the .....

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4 - GUJARAT HIGH COURT (07.11.2012). The Hon. High Court observations under Para 5 also state the OIO (06.01.2010) was passed by relying on the binding High Court judgment (07.11.2012). The Hon. High Court in the said case Astik Dyestuff Pvt. Ltd. Versus Commissioner of C. Ex. & Customs [2014 (1) TMI 776 - GUJARAT HIGH COURT ], under which the Bench s attention was drawn to the Government s Circular dated 29-04-2011, instead of upholding or overruling the said Circular, with reasons, bestowe .....

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ms [2014 (1) TMI 776 - GUJARAT HIGH COURT ], the OIO dated 06-01-2010 has been undeservedly and undesirably dignified as proper and correct and the Circular dated 29-04-11, justifiably issued in public interests by an Authority within its powers and rights, has been faulted with for wrong reasons and ostracized and banished out of Gujarat though in the rest of India the Circular still commands the respect, obedience and the sanctity it deserves. Under these circumstances the judgement Astik Dyes .....

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vat credit of tax paid on commission was allowed but later under para 11 have ruled that such credit is not allowed. Further vide para 4.5 it has been stated that Assessee-Respondent had taken support of the said Circular No. 943/04/2011-CX dated 29.04.2011 in the course of the arguments but thereafter the Hon. Court has preferred to remain absolutely silent and avoided altogether to discuss or deal with the Circular at all in the entire judgment as if the Circular did not exist at all. Thus a g .....

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e statutory binding definition under Section 65(19)/FA, 1994 and also by virtue of Rule 2(t)/CCR, 2004 in the CCR, 2004 still by denying credit or demanding recovery of credits earlier legitimately taken, relying on the Hon. Gujarat High Court s verdicts which are res integra, such denied or recovered amounts of money are being usurped in Gujarat only at the cost of the hapless assesses. This way the assesses in Gujarat only suffer unjust impoverishment while the Commissionerates in Gujarat indu .....

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tions, back-dating of the of the Hon. High Court judgment dated 07.11.2012 to prior to 06.01.2010 and 29.04.2011. In all the 3 cases viz. Commissioner of C. Ex., Ahmedabad-II Versus Cadila Healthcare Ltd. - 2013 (1) TMI 304 - GUJARAT HIGH COURT, Astik Dyestuff Pvt. Ltd. Versus Commissioner of C. Ex. & Customs [2014 (1) TMI 776 - GUJARAT HIGH COURT ] and Commissioner Versus Dynamic Industries Ltd [2014 (8) TMI 713 - GUJARAT HIGH COURT] the Commissioner as Appellant or Respondent, despite the .....

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] cases that existence since 29-04-2011 of the said Circular was also brought to the notice of the Hon. Court. The Commissioner did not aid the Hon. Court in appreciating the Circular and arriving at the correct decision. The Commissioner was more motivated and driven by a penchant for a pecuniary gain to the Department rather than serving the interests of justice and fair play. The Commissionerates in Gujarat and the Hon. Ahmedabad Tribunal, after the decision in the case Commissioner of C. Ex. .....

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fect of the jurisdictional Hon. High Court' syndrome. Board s Circular No.85/2002-Cus dated 11.02.2002 also enjoins not to treat even the Hon. Apex Court s judgement as ratio decidendi if it is a decision which is not expressed and is not founded on reasons nor it proceeds on consideration of issue. The Hon ble Supreme Court in a case reported in 1991 JT Vol. III, State of U.P. Vs. M/s. Synthetics and Chemicals Ltd. and Another [1991 (7) TMI 297 - SUPREME COURT] where therein the lordships h .....

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A] has held: It is trite to say that a decision is binding not because of its conclusions but in regard to its ratio and the principles laid down therein. Any declaration or conclusion arrived without application of mind or preceded without any reason cannot be deemed to be a declaration of or authority of a general nature binding as a precedent. Restraint in dissenting or over-ruling is for sake of stability and over-ruling is for sake of stability and uniformity but rigidity beyond reasonable .....

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unable to show any perversity or illegality in the order of Tribunal - In that view, availment of credit upheld. In the case: JPP Mills Pvt. Ltd. and 2 others v/s. CCEX, Salem [2013 (12) TMI 1122 - CESTAT CHENNAI] the Hon. Tribunal vide para 12 therein, after viewing both the Ambika and the Cadila conflicting judgments of the Hon. High Courts, have ruled that the issue stands accepted by the Government vide the said Circular dated 29-04-2011. In the case: Wadpack Pvt. Ltd Vs CCE, Bangalore [2012 .....

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omotion, an activity specifically covered in the inclusion portion in the definition of input service. Decisions/rulings/judgments in the following cases also uphold that the tax paid on services of a commission agent is available as cenvat credit 1) Bajaj Hindustan Ltd Vs CCE Lucknow (2013 (6) TMI 616 - CESTAT NEW DELHI; 2) C.C.E. & S.T., Surat-II Versus Shree Kamrej Vibhag Khand Udyog Sahakari Mandli Ltd. ( 2014 (8) TMI 15 - CESTAT AHMEDABAD; 3) Century Rayon Vs CCE Thane I 2011 (12) TMI 1 .....

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