Custom, Excise & Service Tax Tribunal
Electrosteel Castings Ltd vs Commissioner Of Gst&Amp;Cce(Chennai ... on 20 November, 2018
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IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal Nos.: E/40993, 40994, 40995, 40996 & 40997/2018
(Arising out of common Order-in-Appeal Nos. 11-15/2018/
AUDIT-II dated 16.01.2018 passed by the Commissioner of
Central Excise, Service Tax & G.S.T., Chennai Audit II
Commissionerate)
M/s. Electrosteel Castings Ltd., : Appellant
Elavur,
Tiruvallur District - 601 211
Versus
The Commissioner of G.S.T. & Central Excise, : Respondent
Chennai Outer Commissionerate
Appearance:-
Shri. T. R. Ramesh, Advocate
for the Appellant
Shri. L. Nandakumar, AC (AR)
for the Respondent
CORAM:
Hon'ble Shri P. Dinesha, Member (Judicial)
Date of Hearing/Decision: 20.11.2018
Final Order No. 42950-42954 / 2018
The appellant is engaged in the manufacture and sale of
Cast Iron Spun Pipes and Ductile Iron Fittings falling under
Chapters 7303 and 7307 of the Central Excise Tariff Act, 1985,
having factory at Elavur and possesses necessary Central Excise
Registration. During the period from November 2014 to October
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2015, the appellant had taken input credit on Business Auxiliary
Services in respect of service tax charged by their Commission
Agents for sales promotion of their products, which included
procurement of orders for the appellant.
2.1 Show Cause Notices/Statements of Demand were issued to
the appellant proposing to disallow the CENVAT Credit on the
above service viz. Business Auxiliary Service, besides other
services on the ground that the appellant is not eligible to avail
CENVAT Credit since the same would not come within the
definition of ‚input service‛ under Rule 2(l) of the CENVAT
Credit Rules (CCR), 2004. The Show Cause Notice also
contemplated imposition of penalty under Rule 15(1) of CCR,
2004 and interest.
2.2 In reply, the appellant submitted that the said credit availed
by them was in respect of services rendered by appellant's
Commission Agents and the nature of services rendered by them
is procuring orders for CI Pipes and DI fittings; that their
responsibility included obtaining tender documents, negotiating,
making correspondences and other necessary steps that are
required to be taken with the customers of their territory and
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procure orders, servicing of the same as regards execution,
settlement of disputes, if any, arising in connection therewith,
collection of dues, collection of statutory sales tax declaration
forms promptly and all other necessary services to ensure full
execution of the order and realization of full dues of the appellant.
It was submitted that the said services were relevant for their
sales promotion and accordingly, credit was correctly taken on
the same which was also reiterated during the personal hearing
by harping that the said service was not for mere sale but for sales
promotion since the said Agents were required to procure orders
for CI Pipes and DI fittings.
2.3 The Adjudicating Authority after hearing the appellants,
passed common Order-in-Original Nos. 64-68/2017 dated
11.05.2017 allowing credit on other services, but disallowing the
credit in respect of Courier Service and Business Auxiliary Service
(Commission Agent) and demanding recovery of credit taken on
these two input services along with interest and penalty. Being
aggrieved by the disallowance as above and consequent demand
on the above services, the appellant had filed appeals before the
first appellate authority who vide impugned Order-in-Appeal
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Nos. 11-15/2018/ AUDIT-II dated 16.01.2018 allowed the credit on
Courier Service, but however upheld the demand on Business
Auxiliary Service. Aggrieved by the denial of credit on Business
Auxiliary Service, the appellant has filed the present appeals
before this forum. The details of the amount of credit denied on
Business Auxiliary Service (BAS) for the respective periods is
given below :
Sl. Appeal Impugned SCN/SOD Period Amount of Penalty
No. No. O-I-A No. No. & involved Credit under Rule
& Date Date denied on 15(1) of
BAS (in Rs.) CCR, 2004
1. E/40997 11/2018 dt. 34/2012 dt. May 2011 to 7,49,665/- 74,966/-
/2018 16.01.2018 17.05.2012 April 2012
2. E/40996 12/2018 dt. 34/2013 dt. May 2012 to 13,68,245/- 1,36,825/-
/2018 16.01.2018 23.05.2013 March 2013
3. E/40994 13/2018 dt. 34/2014 dt. April 2013 to 8,76,401/- 87,640/-
/2018 16.01.2018 28.04.2014 March 2014
4. E/40995 14/2018 dt. 21/2015 dt. April 2014 to 9,69,984/- 96,998/-
/2018 16.01.2018 07.05.2015 October 2014
5. E/40993 15/2018 dt. 32/2015 dt. November 21,76,974/- 2,17,697/-
/2018 16.01.2018 03.12.2015 2014 to
October 2015
3. Today when the matter came up for hearing, Ld. Advocate
Shri. T. R. Ramesh appeared on behalf of the assessee while Ld.
AC (AR) Shri. L. Nandakumar appeared on behalf of the
Revenue.
4. Ld. Advocate contended that the issue is no more res integra
as the same stands decided by the decisions of various judicial
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fora. He also submitted that for the next period, the
Commissioner (Appeals) has accepted the stand of the appellant
and allowed the appeal.
5. Per contra, Ld. AR Shri. L. Nandakumar supported the
findings of the lower authorities.
6. I have heard the rival contentions, perused the documents
placed on record and have also gone through the judgements
referred to during the course of arguments.
7.1 On a careful consideration of the pleadings vis-à-vis the
issue on hand, I find that whether the service of Commission
Agent is an eligible input service under amended Rule 2(l) of the
CENVAT Credit Rules, 2004, is the crux to be decided. The CBEC
Circular No. 943/4/2011-CX dated 29.04.2011 has clarified the
issues relating to CENVAT Credit Rules and the relevant credit
for the issue on hand is at Sl. No. 5, which reads as under :
Sl. No. Issue Clarification
‚1. .... ....
.
.
.
Is the credit of Business The definition of input
5. Auxiliary Service (BAS) service allows all credit on on account of sales services used for clearance commission now of final products up to the disallowed after the place of removal. deletion of expression Moreover, activity of sale ‚activities related to promotion is specifically 6 business‛? allowed and on many occasions the remuneration for same is linked to actual sale.
Reading the provisions harmoniously, it is clarified that credit is admissible on the services of sale of dutiable goods on commission basis.‛ 7.2 From a bare reading of the above, it is clear that the credit is admissible on the 'services of sale' of dutiable goods on commission basis. The commission is payable only when the 'services of sale' of the dutiable goods are made through another person and not by self : what is clear from the above clarification is that it is the credit on 'services of sale' and not sale per se. The above referred CBEC Circular being clarificatory in nature, is retrospective in nature as no substantive change is brought in. Ld. Advocate also relied on various decisions/Orders of courts to substantiate that the clarifications issued by the CBEC could only be retrospective. On going through the above and in the context of the case on hand, I have no hesitation to hold that the above CBEC Circular (supra) should only be retrospective in operation. 7.3 I have also gone through the contract with the broker to whom commission is paid and the agent is not a sole agent of the 7 appellant. The term of brokerage is also fixed. Going by the above clauses therein, I find that the activities undertaken by such Commission Agent/broker would definitely fall under the 'services of sale' because of their responsibilities such as labour, promotion as also the settlement of disputes, if any, collection of dues in time, collection of duly receipted inspection notes, etc. My above view stands fortified by the Order of the Commissioner (Appeals) in the assessee's own case for a subsequent period.
8. In view of the above, I am of the considered opinion that the demands as also the impugned Orders are not sustainable for which reason I set aside the same.
9. The appeals are therefore allowed with consequential benefits, as per law.
(Operative part of the order was pronounced in open Court) (P Dinesha) Member (Judicial) Sdd