CENVAT - Sales Commission are not Input Services - If there is any conflict between jurisdictional HC and Circular, decision of HC is binding on Revenue rather than Circular - Credit rightly denied by CESTAT - Appeal dismissed: HC
By TIOL News Service
AHMEDABAD, FEB 26, 2014: THE Respondents had availed CENVAT Credit on Sales Commission Services obtained by them.
The adjudicating denied this credit but the Commissioner(A) allowed the appeal of the assessee accepting their contention that sales commission paid is an activity relating to their business incurred before the clearance of goods and that on the basis of orders procured by the commission agent, clearances are made.
In appeal before the CESTAT, the Revenue submitted that the ‘sales commission services' cannot fit into the definition of ‘Input service' u/r 2(l) of CCR, 2004 in view of the Gujarat High Court decision in the case of M/s.Cadila Healthcare Ltd. - 2013-TIOL-12-HC-AHM-ST .
After extracting the deliberation made by the High Court in its order, the CESTAT observed -
"5. After recording the above decision, the Hon'ble Gujarat High Court has not agreed with the contrary view taken by the Hon'ble Punjab & Haryana High Court in the case of Commissioner of Central Excise vs. Ambika Overseas. No distinction can be made between the commission paid to the foreign agent and the agents operating within the territory of India because nature of services provided by both the categories of the agents are same. Therefore, I hold that the law laid down by Hon'ble High Court of Gujarat in the case of Commissioner of Central Excise vs. Cadila Healthcare (supra) is squarely applicable to the facts of the present case and accordingly the Order in Appeal passed by the Commissioner (A) is required to be set-aside and the Order in Orig inal dated 06/01/2010 is required to be restored.."
The Revenue appeal was allowed and was reported as 2013-TIOL-680-CESTAT-AHM.
Against this order, the assessee filed an appeal before the Gujarat High Court.
It is submitted that in view of circular issued by CBEC 943/04/2011-CX , Dated: April 29, 2011 , the appellant shall be entitled to CENVAT Credit on Sales Commission Services obtained by them; that as the circular is binding on the department, it could not have taken a contrary decision. It is further submitted that since the decision of the Gujarat High Court (supra) is contrary to that of the Punjab & Haryana High court in the case of Ambika Overseas (2011-TIOL-951-HC-P&H-ST), which allows the credit, the matter should be referred to the Larger bench.
The High Court observed -
++ On interpretation of the relevant provision of law, in the case of Cadila Health Care Limited (supra) jurisdictional High Court has held that on Sales Commission Services obtained by them, Cenvat credit is not permissible. It appears that while issuing the circular dated 29.4.2011, CBEC has not considered the decision of this Court in the case of Cadila Health Care Limited (supra).
++ In any case, the decision of the jurisdictional High Court is binding to the department rather than the circular issued by the CBEC. If there is any conflict between the jurisdictional High Court and the CBEC circular, the decision of the jurisdictional High Court is binding to the department rather than CBEC circular. Under the circumstances, the contention on behalf of the appellant that the department has erred in taking contrary decision then the CBEC circular, cannot be accepted.
In the matter of the request made to refer the issue to the Larger Bench, the High Court rejected the same by observing -
+ It is required to be noted that decision of the jurisdictional High Court - this Court in the case of Cadila Health Care Limited (supra) is challenged before the Hon'ble Supreme Court and the Hon'ble Supreme Court is seized with the matter. It is reported that judgment and order passed by this Court in the case of Cadila Health Care Limited (Supra), has not been stayed. The decision of the jurisdictional High Court is binding to the department rather than decision of the other High Court.
+ When there are two contrary decisions, one of jurisdictional High Court and another of the other High Court, then the decision of the jurisdictional High Court is binding to the department and not the decision of another High Court. Under the circumstances, while passing OIO and while passing the impugned judgment and order, the learned CESTAT has rightly relied upon the binding decision of the jurisdictional High Court in the case of Cadila Health Care Limited (supra).
+ Merely because there might be a contrary decision of another High Court is no ground to refer the matter to the Larger Bench against the decision of this Court, to which, as such, we are in agreement.
Holding that the decision in Cadila Health Care Ltd. squarely covers the matter against the appellant and there is no error committed by the CESTAT, the appeal filed by the assessee appellant was dismissed.
(See 2014-TIOL-237-HC-AHM-ST )
