Custom, Excise & Service Tax Tribunal
Greaves Cotton Ltd Ii vs Commissioner Of Gst&Amp;Cce(Chennai ... on 8 July, 2019
1
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT NO. III
Excise Appeal No. 40722 of 2019
(Arising out of Order-in-Appeal No. 693/2018(CTA-II) dated 28.12.2018 passed by
the Commissioner of G.S.T. & Central Excise, Newry Towers, 2054/1, II Avenue, 12 th
Main Road, Anna Nagar, Chennai - 600 040)
M/s. Greaves Cotton Ltd., Unit-II : Appellant
No. D-18, SIPCOT Industrial Complex,
Gummidipoondi Taluk,
Gummidipoondi - 601 201
VERSUS
The Commissioner of G.S.T. & Central Excise, : Respondent
Chennai Outer Commissionerate, Newry Towers, No. 2054/1, II Avenue, 12th Main Road, Anna Nagar, Chennai - 600 040 APPEARANCE:
Ms. S. Sridevi, Advocate for the Appellant Shri. L. Nandakumar, Authorized Representative for the Respondent CORAM:
HON'BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL) FINAL ORDER NO. 40901 / 2019 DATE OF HEARING: 08.07.2019 DATE OF DECISION: 08.07.2019 Brief facts are that the appellants are engaged in the manufacture of construction and mining equipment and are availing the facility of CENVAT Credit of Service Tax paid on input services, etc. 1.2 During the course of audit, it was noticed that the appellants had availed ineligible credit of the Service Tax paid on sales commission to their sales agents. The Department was of the view that the said credit is not eligible as these services are not directly or indirectly related to the manufacture of the final product.2
1.3 A Show Cause Notice was issued to the appellants proposing to demand the irregularly availed credit to the tune of Rs. 8,16,083/-
along with interest and for imposing penalty. After due process of law, the Original Authority confirmed the demand, interest and imposed penalty. In appeal, the Commissioner (Appeals) vide impugned order dated 28.12.2018 upheld the same. Hence, this appeal.
2.1 On behalf of the appellant, Ld. Advocate Ms. S. Sridevi appeared and argued the matter. She adverted to the definition of "input service", as it stood prior to 03.02.2016 as well as post 03.02.2016. It is submitted by her that sales promotion was within the inclusive part of the definition. The appellants had engaged overseas commission agents for promoting the sales of the finished products manufactured by the appellants. Commission was paid to them according to the quantity of goods sold by them. The agreement shows that these commission agents have also to endeavour to promote the sales of the finished products manufactured by the appellant. It is also argued by her that without making an effort to promote the products, the commission agents cannot achieve their targets of selling the products.
2.2 The Department has relied upon the decision of the Hon'ble High Court of Gujarat in the case of Commissioner of C.Ex., Ahmedabad-II Vs. M/s. Cadila Healthcare Ltd. reported in 2013 (30) S.T.R. 3 (Guj.) to deny the CENVAT Credit holding that it is mere sale of goods and there is no activity of promotion of the goods. Ld. Advocate has argued that the explanation added to the definition of "input service" with effect from 03.02.2016 is only clarificatory in nature. The Tribunal in the case of C.G.S.T., Cus. & C.Ex., Alwar Vs. M/s. Krishi Icon reported in 2018 (7) T.M.I. 97 - CESTAT New Delhi had considered the application of the said explanation and held that the Service Tax paid to the sales commission agent is eligible for credit since such activities are in the nature of sales promotion.
2.3 She also adverted to the Board Circular No. 943/4/2011-CX dated 29.04.2011 wherein it has been explained that sales promotion is linked with actual sale and therefore, credit is eligible on Service Tax paid to sales commission agent activities also.
33. Ld. AR Shri. L. Nandakumar appearing on behalf of the respondent supported the findings in the impugned order. He emphasized that the above explanation was introduced in the definition of input services, which states that the commission paid to sales commission agents is eligible for credit and the same falls within the definition of "input service" only with effect from 03.02.2016, as clarified. Prior to this, the inclusive part of the definition allowed credit only on services related to sales promotion. The activity done by a sales commission agent being merely sale of goods, cannot be considered as sales promotion. The Hon'ble High Court of Gujarat in the case of M/s. Cadila Healthcare Ltd. (supra) has analysed this issue and held that for mere sales commission agent activities, the credit is not eligible.
4. Heard both sides.
5. The issue involved is whether the appellants are eligible for credit of the commission paid to agents working abroad for sale of their goods.
6.1 On perusal of the agreement placed along with the appeal, in paragraph IV, 'Rights and Obligations of Distributor' is stated. In Clause (A) it is stated that the distributor is stationed abroad and has to make every effort during the term of the agreement "to sell and actively promote the sale of Greaves Products in all lawful ways and to the maximum extent possible." In Clause (C) of the same paragraph it is stated that the "distributor agrees to maintain a sales force, where appropriate number of trained persons who will actively solicit the sale and promote the advantages of the Greaves Products." Thus, the distributor/commission agent appointed by the appellant outside India has to make every effort to promote the products manufactured by the appellant. It is thus not merely an activity of sale of finished products.
6.2 The decision of the Hon'ble Gujarat High Court in the case of M/s. Cadila Healthcare Ltd. (supra), therefore, has no application in the present facts of the case.
6.3 Further, the Board vide Circular No. 943/4/2011-CX dated 29.04.2011 has clarified that the remuneration paid to sales 4 commission agents is linked with actual sale and it involves an element of sales promotion. The same has been discussed in paragraph 10.12 of the order passed by the Adjudicating Authority.
6.4 The Tribunal in the case of M/s. Krishi Icon (supra) had occasion to analyse the application of the explanation added with effect from 03.02.2016 and had observed that it was merely clarificatory in nature and that commission paid for sales commission activities prior to 03.02.2016 is also eligible.
7. After appreciating the facts and evidences presented before me as well as following the decision of the Tribunal in M/s. Krishi Icon (supra), I am of the view that the denial of credit is unjustified. The impugned order is set aside.
8. The appeal is allowed with consequential reliefs, if any, as per law.
(Dictated and pronounced in open court) (SULEKHA BEEVI C.S.) MEMBER (JUDICIAL) Sdd