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Cenvat credit admissible on services of sales commission agent

Cenvat Credit - By: - Bimal jain - Dated:- 16-2-2016 Last Replied Date:- 18-2-2016 - Background: Even though the definition of input services given under Rule 2(l) of the Cenvat Credit Rules, 2004 ( the Credit Rules ) covers the services of sales promotion in its inclusive part, eligibility to avail Cenvat credit on the services rendered by a commission agent has been disputed recently because of divergent judgments and views of the Department. In this regard, the Hon ble Punjab & Haryana Hi .....

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case is reproduced hereunder: ….8.The Tribunal while affirming the order of Commissioner (Appeals) and adjudicating the issue in favour of the respondent had come to the conclusion that the activities in respect of which cenvat had been filed, were pre-removal activities and the same could not be held to be post-removal. It was further observed that canvassing and procuring orders were in relation to sales promotion and would fall under sales promotion activities. These activities were, .....

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Central Board of Excise and Customs ( CBEC ) vide Circular No. 943/04/2011-CX dated April 29, 2011 had also clarified that Cenvat credit on account of commission on sales is appropriately covered under definition of input service as defined under Rule 2(l) of the Credit Rules: 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 serv .....

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COURT], held that the agents are directly concerned with sales rather than sales promotion, thus the services provided by them is not covered in main or inclusive part of definition of input service in Rule 2(l) of the Credit Rules. Relevant extract of the judgment is reproduced hereunder for the ease of reference: ……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 whet .....

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products and clearance of final products from the place of removal. Obviously, commission paid to the various agents would not be covered in this expression since it cannot be stated to be a service used directly or indirectly in or in relation to the manufacture of final products or clearance of final products from 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 .....

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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 (Emphasis Supplied) Thus, the matter of availing Cenvat credit on services of sales commission agents has been a subjective issue mainly due to the judgment in Cadila Healthcare case, which came as a setback for many manufacturers availing Cenvat cr .....

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tion 02/2016-CE (NT) dated February 3, 2016 ( the Notification ) had amended the definition of input services under Rule 2(l) of the Credit Rules to insert following explanation after sub-clause (C): Explanation.-For the purpose of this clause, sales promotion includes services by way of sale of dutiable goods on commission basis. Conclusion: Thus, Cenvat credit may be availed on services of sales commission agents also. Further, with the insertion of stated explanation, it may be contended by t .....

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sales promotion' was always there in the CCR, 2004 definition 2(l) pre- or post- 2011 and its scope, coverage and meaning was most lucidly explained in the definition of BAS in the parent Act viz. FA, 1994 vide Section 65 (19), Vide Rule 2(t) CCR, 2004 the definition of sales promotion in the Act also applied to the definition of sales promotion in CCR, 2004 Rule 2(l). Notwithstanding Cadila the Tariff Conference held in September, 2015 in response to the point B-30 concluded that credit of .....

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