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2016 (1) TMI 1063 - GUJARAT HIGH COURT

2016 (1) TMI 1063 - GUJARAT HIGH COURT - 2016 (41) S.T.R. 794 (Guj.) - Cenvat Credit - input services - Service Tax paid on commission amount paid to dealers/stockist - nexus with manufacturing activity - Whether the activities undertaken by the service provider were in nature of sales promotion activity? - Held that:- predominantly the entire agreement was one in the nature of appointing a partnership firm as stockist of the appellant company who would upon being supplied the goods in question .....

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016 - MR. AKIL KURESHI AND MR. MOHINDER PAL, JJ. FOR THE APPELLANT : MR HARDIK P MODH, ADVOCATE (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. The appeal is filed challenging the judgement of CESTAT raising the following questions for our consideration : 1) Whether the Tribunal was correct in relying upon the decision passed by the Hon'ble Gujarat High Court in the case of Commissioner of Central Excise vs. Cadilla Healthcare Ltd. reported in 2013(30) S.T.R. 3 (Guj) even though the appellant .....

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ties to be undertaken by the Stockiest/distributors and denied CENVAT credit on input services? 4) Whether the activities undertaken by the service provider were in nature of sales promotion activity? 2. The adjudicating authority by order dated 30.5.2014 held that the payment to the agents appointed by the appellant would not be eligible for cenvat credit. The adjudicating authority relying on the decision of this Court in case of Commissioner of C.Ex. AhmedabadII v. Cadila Healthcare ltd. repo .....

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y commission agent does 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 th Rules and, therefore, the assessee is not eligible for Cenvat credit in respect of the service tax paid on commission paid to the commission agents. 3. The appeal of the assessee was dismissed by the Commissioner (Appeals) upon which a further appeal to the Tribunal was filed. The Tribunal also placed heavy reliance on the decision of this .....

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he appellant with interest and appeal with respect to CENVAT credit on services of Sales Commission, availed by the appellant is rejected. 4. Learned counsel Shri Modh for the appellant drawing our attention to the agreement executed between the parties and its agents contended that the agents were also involved in the sales promotion. If that be the case, the decision of this Court in case of Cadila Healthcare ltd. (supra), would not apply. 5. In case of Cadila Healthcare ltd. (supra), Division .....

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t that in case of sales promotion a large population of consumers is targeted. Such activities relate to promotion of sales in general to the consumers at large and are more in the nature of the activities referred to in the preceding paragraph. Commission agent has been defined under the explanation to business auxiliary service and insofar as the same is relevant for the present purpose means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or .....

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said expression. The term input service as defined in the rules means any service used by a provider of taxable service for providing an output service or used by the manufacturer whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal and includes services used in relation to various activities of the description provided therein including advertisement or sales promotion. Thus, the portion of the definiti .....

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rom the place of removal. The includes portion of the definition refers to advertisement or sales promotion. It was in this background that this court 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 .....

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ndered by a commission agent is a service received in relation to the assessees 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 networking, credit rating, share registry, and security. The words activities relating to business are followed by the words such as. Therefore, the words such as .....

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ntioned in the subrule. However, that does not mean that every activity related to the business of the assessee would fall within the inclusive part of the definition. For an activity related to the business, it has to be an activity which is analogous to the activities mentioned after the words such as. What follows the words such as is accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security. Thus, .....

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ity is in any manner similar to the services rendered by commission agents nor are the same in any manner related to such services. Under the circumstances, though the business activities mentioned in the definition are not exhaustive, the service rendered by the commission agents not being analogous to the activities mentioned in the definition, would not fall within the ambit of the expression activities relating to business. Consequently, CENVAT credit would not be admissible in respect of th .....

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