By TIOL News Service

MUMBAI, SEPT 07, 2015: THE appellants are manufacturers of steel products and employed various agents for sale of their products. These agents are registered as commission agents under "Business Auxiliary Service" and pay service tax and which is being availed as CENVAT credit by the appellant.

The appellants were issued SCN alleging that the credit taken of ST paid by these commission agents during the period 2007-08 to 2011-12 is not admissible under CCR, 2004. The SCN relies on the decision in Vikram Ispat vs. CCE Raigad - 2009-TIOL-997-CESTAT-MUM. Based on the above decision, it was alleged that the services of sales commission agent cannot be considered as a service used by the manufacturer directly or indirectly, in or in relation to the manufacture and clearance of final products from the place of removal. Further, it is also alleged that no sales agreement or correspondence is produced to establish that such sales promotion services have been rendered and used.

The CCE, Raigad was pleased to confirm the demands by distinguishing the activity of "Sales Promotion" and "Sales" and relying on the Gujarat High Court decision in Cadila Healthcare Ltd. - 2013-TIOL-531-CESTAT-AHM for this purpose. He confirmed interest and penalties as well.

The appellants are in appeal before the CESTAT.

They rely on serial no. 5 of the clarification given by the CBEC in Circular No. 943/04/2011-CX dated 29/04/2011 and also inform that the same CCE has subsequently taken a different stand on the same issue in the case of Bhushan Steel Ltd. (O-in-O dated 23/10/2013).

It is further submitted by the appellant that the activity undertaken by them is not merely sale of goods but sales promotion and in support they produced the Letters written by their agents to various consumers offering them the products manufactured by the appellant; advertisement placed by them in various newspapers advertising their products manufactured by the appellant; bills for payment of such advertising expenses andcopies of calendars printed for advertisement of the appellant's products and bills for making the same. Inasmuch as it is asserted that the activity undertaken is "sales promotion" and not a mere "sales" activity and, therefore, credit is admissible. The decision in Cadila Healthcare Ltd. was distinguished by pointing out that in that case the activity undertaken was mere "sales activity" whereas in their case they are actively engaged in "Sales Promotion".

The AR relied on the decisions in Cadila Healthcare Ltd. - 2013-TIOL-12-HC-AHM-ST, Astik Dyestuff Pvt. Ltd. - 2013-TIOL-680-CESTAT-AHM, Dynamic Industries Ltd. - 2014-TIOL-1692-HC-AHM-ST & Paras Motors Mfg. Co. - 2013-TIOL-525-CESTAT-AHM and submitted that the activity undertaken by appellant is not a "Sales Promotion activity" but "sales activity". His assertion was that to claim the activity as "Sales Promotion" the appellant needs to produce evidence to the fact that there was indeed an increase in the sales of goods as a result of their activity.

The Bench held that the decisions relied by the AR were distinguishable and further observed that the evidences produced by the appellant clearly showed that they are not only selling the goods but also actively approaching new clients, putting advertisements, giving diaries and calendars and which activities can clearly be termed as "Sales Promotion" activities and not merely "sales" activities; moreover the department itself had changed its stand on the issue.

Noting that the decision of the Tribunal in the case of Rosa Sugar Works - 2014-TIOL-150-CESTAT-DELconcluding that the service of commission agents [Business Auxiliary Service] of procuring sales orders is covered by the definition of 'input service' and would be eligible for Cenvat credit, is clearly applicable to the case on hand, the appeal was allowed.

(See 2015-TIOL-1880-CESTAT-MUM )