Custom, Excise & Service Tax Tribunal
Liebherr Machine Tools India Pvt. Ltd vs Commissioner Of Central Excise, ... on 12 February, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: ST/74/2011-DB [Arising out of Order-in-Original No. 24/2010 dated 02/11/2010 passed by the Commissioner of Central Excise, Bangalore-II] For approval and signature: HON'BLE SMT ARCHANA WADHWA, JUDICIAL MEMBER HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes Liebherr Machine Tools India Pvt. Ltd. No. 353/354, 4th Main Road, 9th Cross, 4th Phase, Peenya Industrial Area, Peenya, Bangalore - 560 058 Appellant(s) Versus Commissioner of Central Excise, Service Tax And Customs Bangalore-II PB 5400, CR Building, Queens Road, Bangalore - 560 001 Karnataka Respondent(s)
Appearance:
Smt Rukmani Menon, Advocate No.128, 'A' Wing Raheja Arcade, Koramangala, Bangalore - 560 095 For the Appellant Shri Mohd Yusuf, AR For the Respondent Date of Hearing: 12/02/2016 Date of Decision: 12/02/2016 CORAM:
HON'BLE SMT ARCHANA WADHWA, JUDICIAL MEMBER HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER Final Order No. 20272 / 2016 Per: ASHOK K. ARYA
1. The appellants have been registered with the Department for cenvat credit for the input services viz. Commission Agent Services which the Department is categorizing as Business Auxiliary Service. The Order-in-Original passed by Commissioner disallowed cenvat credit to the tune of Rs. 1,14,99,823/- (Rupees One Crore Fourteen Lakhs Ninety Nine Thousand Eight Hundred and Twenty Three only) and held that it is recoverable along with interest and he also imposed equivalent penalty under Section 11AC of Central Excise Act read with Rule 15 of the Cenvat Credit Rules, 2004.
2. The appellants viz. M/s. Liebherr Machine Tools India Pvt. Ltd. are before this Tribunal against the above order of Commissioner with the request to set aside the said order with consequential relief.
2.1. The appellants mainly argue that the input services in question are actually in the category of Sales Promotion relating to their business of manufacturing the said machinery viz. gear hobbing machines, gear shaping machines, gear grinding machines and their customers are automobile industries. The appellants represented by the learned advocate, Smt. Rukmani Menon mainly plead that these input services are not in the nature of selling agency but in the nature of sales promotion and for the sales promotion only they are compensating M/s. Francis Klein & Co. The learned advocate is referring to the agreement, which they have signed with M/s. Francis Klein & Co. Pvt. Ltd.; it has the Clause 2 saying they will pay commission of 6.5% to M/s. Francis Klein & Co. Pvt. Ltd., and further she refers to Clause 6(i) that the appellant would provide Francis Klein with complete catalogues, brochure books, circular for promoting the sale of their products.
2.1.1. The learned advocate also refers to Honble Punjab & Haryana High Courts decision in the case of Commissioner of Central Excise, Ludhiana Vs. Ambika Overseas [2012 (25) S.T.R. 348 (P&H)], saying that canvassing and procuring of orders are in the category of Sales Promotion and within the ambit of definition of input service under Rule 2(l) of Cenvat Credit Rules, 2004 and therefore, they would be entitled to take cenvat credit of service tax paid by them as a recipient of the said services. She also relies upon the following decisions:
a) Novozymes South Asia Pvt. Ltd. Vs. CCE, Bangalore [2015 (38) S.T.R. 204 (Tri.-Bang.)]
b) Final Order Nos. 20176-20183/2014 dated 31.01.2014 in the case of Bhuruka Gases Ltd. Vs. CCE, Bangalore I
3. Revenue represented by learned AR, Shri Mohd Yusuf argues that the input services in question availed by the appellants are more in the nature of Commission Agent for the sales and cannot be called as services for sales promotion only. He has referred to the Honble Gujarat High Court decision in the case of CCE, Ahmedabad-II Vs. Cadila Healthcare Ltd. [2013 (30) S.T.R 3 (Guj.)] saying that commission paid to the agents for the sales cannot be part of the definition of input services. He says party viz. M/s. Francis Klein & Co. Pvt. Ltd., with whom appellants have entered into an agreement are actually the agents who are concerned with sales rather than sales promotion.
4. The facts on record and the submissions of both the sides have been carefully considered. The facts and circumstances including the contents of the agreement between the appellant and M/s. Francis Klein & Co. Pvt. Ltd., with whom the appellants entered into sales promotion agreement have been considered. The services in question cannot be called commission agency services for sales. When we examine and consider all the activities of M/s. Francis Klein & Co. Pvt. Ltd., it is clear that they are engaged in promotion of sales for the products manufactured by the appellants. Here the agreement says that appellants would provide them complete catalogue instruction books, circulars for promoting sales. It also says that the appellants will execute orders promptly placed by said Francis Klein & Co. Pvt. Ltd. We cannot say that said M/s. Francis Klein & Co. Pvt. Ltd. are only primarily concerned with sales not with the sales promotion. It is to be noted that without any sales promotion there cannot be any final sale. During the hearing, it has been pointed out that the compensation to M/s. Francis Klein & Co. Pvt. Ltd. is on account of final sales as the percentage of those sales but it does not mean that they are not doing any sales promotion for the products being manufactured by the appellants. The decision of this Tribunal in Bhuruka Gases Ltd. Vs. CCE, Bangalore I referred to by the appellants has discussed in detail sales promotion activity. For better appreciation we reproduce para 7 of the said order:
7. Now the question to be considered is whether in this case the agents have undertaken sales promotion activity or not. If the answer is yes, the credit would be admissible and otherwise no. The learned CA relied upon the letter written by one of the two agents namely Agnes Bruno Ltd. dated February 15th 2007. In this letter, Agnes Bruno Ltd. had informed the appellant that they lend a helping hand to the Business Houses to sell their products. They undertake canvassing of business not only to retain the existing clientele of the company but to find new customers as well. They also stated that the appellant could take the best advantage of their network available through out the country to sell their bulk products viz., Liquid Gases on commission basis. They also gave details of Registration, Income Tax, Sales tax, service tax, Balance sheet etc. This would show that even though the invoice which speaks particularly sales commission, taking note of the letter of the agent that they would help in selling the products, in canvassing business and make their network available for expanding the business, in my opinion this is nothing but sales promotion. In respect of another agent namely SPS Metal Cast & Alloys Ltd., the appellant could not show any letter or agreement. However in every debit note, the opening sentence reads as under:
Being our commission towards the procurement of order for the liquid nitrogen to various parties as per details given below In the case of Ambika Overseas, Honble High Court of Punjab & Haryana has taken the view that procurement of orders is one of the aspects of sales promotion. 4.1. After considering the facts on record and above discussions we are of the view that the input services in question are in the category of Sales Promotion, which would be covered by definition of input services given in Rule 2(l) of Cenvat Credit Rules 2004. Therefore the appellants would be entitled to the cenvat credit for the service tax paid for these input services in question. The impugned order consequently is hereby set aside with consequential relief, if any. The Appeal is allowed in above terms.
(Order pronounced and dictated in open court) (ASHOK K. ARYA) TECHNICAL MEMBER (ARCHANA WADHWA) JUDICIAL MEMBER iss