Custom, Excise & Service Tax Tribunal
M/S Rosa Sugar Works vs Cce, Lucknow on 1 November, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. IV Excise Appeal No. 149-153 of 2011 (SM) [Arising out of the Order-in-Appeal No. 299 to 303-CE/LKO/2010 dated 29/09/2010 passed by The Commissioner (Appeals), Central Excise & Service Tax, Lucknow.] For Approval and signature : Honble Shri Rakesh Kumar, Member (Technical) 1. Whether Press Reporters may be allowed to see : the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would be released under Rule 27 of : the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair : copy of the order? 4. Whether order is to be circulated to the : Department Authorities? M/s Rosa Sugar Works Appellant Versus CCE, Lucknow Respondent
Appearance Shri Mayank Garg, Advocate for the appellant.
Shri A.K. Jain, Authorized Representative (Jt. CDR) - for the Respondent.
CORAM : Honble Shri Rakesh Kumar, Member (Technical) DATE OF HEARING : 01/11/2013.
Final Order No. 58246-58250/2013 Dated : 01/11/2013 Per. Rakesh Kumar :-
The appellant are manufacturers of sugar chargeable to Central Excise duty. The point of dispute in this case is as to whether they are eligible for Cenvat credit of service tax paid on commission agents service availed for procuring orders for sale of sugar. The department being of the view that the commission agents service (Business Auxiliary Service) for procuring sales orders is not covered by the definition of input service, issued five show cause notices for disallowing the Cenvat credit, its recovery alongwith interest and imposition of penalty. The Jurisdictional Assistant Commissioner by five separate orders, disallowed the Cenvat credit and confirmed the Cenvat credit demands alongwith interest and imposed penalties under Rule 15. On appeals being filed to Commissioner (Appeals), the Commissioner (Appeals) by a common order-in-appeal dismissed the appeals against which these five appeals have been filed.
2. Heard both the sides.
3. Shri Mayank Garg, Advocate, the learned Counsel for the appellant, pleaded that the issue involved in this case stands decided in the appellants favour by judgment of Honble Punjab & Haryana High Court in the case of Ambika Overseas reported in 2012 (25) S.T.R. 348 (P&H), wherein Honble High Court has held that the service provided by overseas commission agents for procurement of orders is sales promotion activity which is specifically definition of input service, that same view has been taken by the Tribunal in the cases of Metro Shoes Pvt. Ltd. vs. CCE, Mumbai I reported in 2008 (10) S.T.R. 382 (Tri. Mumbai); Salasar Copper vs. CCE, Vapi reported in 2012 (277) E.L.T. 361 (Tri. Ahmd.); DSCL Sugar vs. CCE, Lucknow reported in 2012 (25) S.T.R. 599 (Tri. Del.); CCE, Raipur vs. Bhilai Auxiliary Industries reported in 2009 (14) S.T.R. 536 (Tri. Del.), and Birla Corporation Ltd. vs. CCE, Lucknow reported in 2013 (288) E.L.T. 427 (Tri. Del.).
4. Shri A.K. Jain, the learned Jt. CDR, defended the impugned order by reiterating the findings of the Commissioner (Appeals) and cited the judgment of Honble Gujarat High Court in the case of CCE, Ahmedabad vs. Cadila Healthcare Ltd. reported in 2013 (30) S.T.R. 3 (Gujarat), wherein Honble High Court in para 5.2 of the judgment has held that the commission agents service of procuring sales orders is neither covered by the term sales promotion appearing in the definition of input service nor the same is covered by the expression activities related to business and that in this judgment, Honble High Court has also taken note of the judgment, Honble Punjab & Haryana High Court in the case of CCE, Ahmedabad vs. Cadila Healthcare Ltd. (supra) and has expressed the view that this Court is unable to concur with the view taken by Honble Punjab & Haryana High Court on this issue. He, therefore, pleaded that there is no infirmity in the impugned order.
5. I have considered the submissions from both the sides and perused the records.
6. I find that an identical issue was involved in the case of Birla Corporation Ltd. vs. CCE, Lucknow [appeal No. E/1270/2011-EX (SM)] and in that case the Tribunal after considering the judgment of Honble Gujarat High Court in the case of CCE, Ahmedabad vs. Cadila Healthcare Ltd. (supra), judgment of Honble Punjab & Haryana High Court in case of M/s Ambika Overseas (supra) and the judgment of Honble Bombay High Court in the case of Ultratech Cement Ltd. 2010 (260) E.L.T. 369 (Bombay), and also the Boards Circular No. 943/4/2011-EX dated 29/4/11 had held 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. In this regard para 7, 7.1, 7.2, 7.3, 8 and 9 of the judgment are reproduced below :-
7. The only point of dispute in this case is as to whether the service of procuring sales orders of cement through commission agents i.e. business auxiliary services being received by them is covered by definition of input service or not. On this issue, while there is a direct judgment of Honble Punjab & Haryana High Court in the case of Ambika Overseas (supra), which is in favour of the appellant, there is another judgment of the Honble Gujarat High Court in the case of Cadila Health Care Ltd. (supra), wherein in para 5.2, a contrary view has been taken and in that judgment, Honble Gujarat High Court, after discussing in detail, has held that the service of commission agent for procuring sales orders is neither covered by the expression sales promotion nor by the expression activities relating to business. Honble High Court in this judgment has observed that the term, activities relating to business in the definition of input service has to be interpreted on the basis of the activities mentioned after the words such as following this expression and that the activities covered by this expression must be similar to the activities which are mentioned as illustrative activities and on this basis, Honble High Court has given a finding that procuring sales orders through commission agents is not an activity, which is similar to the activities mentioned as illustration of the activities relating to business.
7.1 However, I find that the Honble Bombay High Court in the case of Ultra Tech Cement reported in 2010 (260) ELT 369 (Bombay) in para 28 and 29 has given the following interpretation of the expression activities relating to business:-
28. In the present case, the question is, whether outdoor catering services are covered under the inclusive part of the definition of input service. The services covered under the inclusive part of the definition of input service are services which are rendered prior to the commencement of manufacturing activity (such as services for setting up, modernization, renovation or repairs of a factory) as well as services rendered after the manufacture of final products (such as advertisement, sales promotion, market research, etc.) and includes services rendered in relation to business such as auditing, financing.etc. Thus, the substantive part of the definition input service covers services used directly or indirectly in or in relation to the manufacture of final products, whereas the inclusive part of the definition of input service covers various services used in relation to the business of manufacturing the final products. In other words, the definition of input service is very wide and covers not only services, which are directly or indirectly used in or in relation to the manufacture of final products but also includes various services used in relation to the business of manufacture of final products, be it prior to the manufacture of final products or after the manufacture of final products. To put it differently, the definition of input service is not restricted to services used in or in relation to manufacture of final products, but extends to all services used in relation to the business of manufacturing the final product.
29. The expression activities in relation to business in the definition of input service postulates activities which are integrally connected with the business of the assessee. If the activity is not integrally connected with the business of the manufacture of final product, the service would not qualify to be a input service under Rule 2 (1) of the 2004 Rules. 7.2 Thus in para 28 and 29 of the above judgment, Honble Bombay High Court has in clear terms held that the expression activities relating to business in the definition of input service in Rule 2 (l) covers all the activities which are integrally connected with the business of the manufacture of final product and only an activity which is not connected with the business of manufacture of final products would not qualify as the input service under Rule 2 (l). In para-28 of this judgment, Honble Bombay High Court has emphasized that the definition of input service is very wide and covers not only services, which are directly or indirectly used in or in relation to the manufacture of final products, but also includes various services used in relation to the business of manufacture of final products, be it prior to the manufacture of final products or after the manufacture of final products and that the definition of input service is not restricted to the services used in or in relation to manufacture of final products. Same view has been taken by Honble Bombay High Court in para 25 of its judgment in case of Coca Cola India Pvt. Ltd. Vs. CCE, Pune-II reported in 2009 (242) ELT 168 (Bom.). The business of manufacture of final product, without any doubt, would include the sale of final product and hence, procuring of sales orders through commission agents would be covered by the expression activities related to business. These judgments of the Honble Bombay High Court have not been considered in the judgment of Honble Gujarat High Court in case of Cadila Health Care Ltd. (supra).
7.3 In any case, when the judgment of two High Courts, on this issue, are in favour of the appellant and besides this, a number of judgments of the Tribunal, as mentioned above, are also in favour of the appellant, it is those judgments which have to be followed.
8. Rule 2 (l) of Cenvat Credit Rules, 2004 was amended w.e.f. 1.4.2011 and by this amendment, the expression activities related to business in the inclusive portion of the definition of input service was excluded. However, the expression advertisement or sales promotion was retained. The Board vide Circular No.943/4/2011-CX dated 29.4.2011 (S.No.5 of the Table) in respect of the question Is the credit of Business Auxiliary Service (BAS) on account of sales commission now disallowed after the deletion of expression activities related to business clarified as under The definition of input service allows all credit on services used for clearance of final products upto the place of removal. Moreover, activity of sale promotion is specifically allowed and on many occasions, the remuneration for the same is linked to actual sale. Reading the provision harmoniously, it is clarified that credit is admissible on the services of sale of dutiable goods on commission basis. Thus according to this circular, the service of commission agents (Business Auxiliary Service) is covered by the term advertisement or sales promotion. In my view, there is nothing in this circular which is contrary to the provisions of law and hence the same would be binding on the Departmental officers. Thus, in view of this circular also, though it is in respect of definition of input service during period w.e.f. 1.4.2011, commission agents service would be cenvatable, as the term advertisement and sale promotion was there in the definition of input service even during period prior to 1.4.2011.
9. In view of this above discussion, the impugned order is not sustainable. The same is set aside. The appeal is allowed.
7. In view of the above, I hold that the impugned order is not sustainable. The same is set aside. The appeals are allowed.
(Pronounced in the open court.) (Rakesh Kumar) Member (Technical) PK