CENVAT - Agent is concerned with sale of goods to defence canteen only, which cannot be considered as sales promotion, for reason that in case of sales promotion, strategy is required to be adopted to motivate a large number of customers to expand business base - service not an Input service: CESTAT
By TIOL News Service
BANGALORE, DECEMBER 13, 2014: REVENUE is in appeal against the order passed by Commissioner(A) setting aside the order of the adjudicating authority.
The issue concerns availment of CENVAT credit of Service Tax paid under various heads.
The allegations leveled and the stand taken by the Tribunal is as jotted below -
(i) C & F Agents commission
Activities that the C & F agent performs on behalf of the respondent includes receiving of finished goods in their godowns, dispatch the same to dealers by raising invoices, collection and deposit of the amount in the banks, performing liaison work pertaining to sales tax and other matters of the respondent's company etc.
According to the Revenue, the post sales services provided by the C & F agent to the respondent cannot be considered as input service, since the said services are not in relation either to manufacture or clearance of finished product from the place of removal.
Held:
+ In terms of Rule 2(t) of the CCR, 2004 the definition assigned in the CEA, 1944 for the expression ‘place of removal' has to be adopted for correct appreciation of the legislative intent behind the definition in the said rule.
+ Sub-section 3(c)(iii) of Section 4 of the said Act defines 'place of removal' to mean "a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory; from where such goods are removed." From the above definition read with the definition of ' input service' as contained in the CCR, it transpires that the services in relation to the activities of removing goods from factory, storing at the depot or C & F agents premises and delivering the same to the customer are falling within the scope and ambit of the said definition clause. Therefore, under the facts and in the circumstances of the case, I am of the considered view that the activities of the C & F agent are conforming to the definition of 'input service', and as such, the respondent is eligible to take CENVAT credit of service tax amount paid on the C & F commission.
+ Reliance placed by the Revenue on the decision in Commissioner of Central Excise, Ahmedabad - II -Vs. - M/s Cadila Health Care Ltd. 2013-TIOL-12-HC-AHM-ST supports the case of the respondent assessee.
(ii) Commission paid to M/s. JAS Marketing Pvt. Ltd., Mumbai, to promote the sale of goods
Paragraph 5 of the SCN explains the activities of JAS Marketing, which are - M/s. Nutrine Confectionery Co. (P) Ltd. are selling their manufactured goods to Defence Canteen Stores Department on obtaining orders from M/s. JAS Marketing. The Company supplies the stock directly to the Canteen Stores Department through M/s. JAS Marketing. M/s. JAS Marketing monitors the collection of sale proceeds and credits the same to the company and for these activities, M/s. NCCPL is paying the commission to them. The said service tax paid on such commission is taken as CENVAT credit by the company in their registers and utilizing the same for payment of Central Excise duty on finished goods.
Held:
+ The activities of the commission agent as indicated above clearly demonstrate that such agent is concerned with the sale of respondents' goods to the defence canteen only, which cannot be considered as sales promotion, for the reason that in case of sales promotion, strategy is required to be adopted to motivate a large number of customers to expand the business base, which is absent in the present case. Thus, in my opinion, service tax paid on the commission amount of M/s JAS Marketing, which is in relation to selling of goods to the individual customer, will not fall within the purview of definition of 'input service' for taking CENVAT credit by the respondent.
+ Interpretation placed in the case of Cadila Healthcare Ltd. by the Gujarat High Court is applicable to the present case in the sense that mere selling agent of goods cannot be equated with the agent providing sales promotion activities.
(iii) Credit on invalid documents
Allegation is that Debit notes based on which the credit has been taken by the respondent were not prescribed documents under the CENVAT statute.
Held: Revenue has not raised the said ground before the first appellate authority. Adjudicating authority has also not recorded any findings in his order regarding the alleged discrepancy. The disputed documents have not been produced by the appellant either at the time of filing or hearing of appeal before the Tribunal. Matter remanded to the original authority for verification of documents.
Conclusion - The appeal is partly allowed in favour of the Revenue so far as CENVAT credit on the commission of JAS Marketing Pvt. Ltd. is concerned. With regard to the issue of CENVAT credit on C & F agents' service, no merit in the appeal filed by the Revenue, and as such, the same is dismissed. Matter remanded in the context of alleged invalid documents for verification.
(See 2014-TIOL-2522-CESTAT-BANG)
