Indian Terrain Fashions Limited Vs Commissioner of GST and Central Excise (CESTAT Chennai)
The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed the appeal filed by Indian Terrain Fashions Limited against an Order-in-Original confirming recovery of ₹51,82,020 as allegedly ineligible Cenvat credit, along with interest and a penalty of ₹5,00,000. The dispute related to Cenvat credit availed on outward freight, sales commission paid to franchisees, and commercial rent paid for franchisee retail outlets during February 2013. The Department alleged that these services were received beyond the place of removal and therefore did not qualify as input services under the Cenvat Credit Rules, 2004.
The Tribunal identified three issues for determination: whether Cenvat credit was admissible on outward freight from the factory to franchisee sales outlets, whether credit on sales commission paid to franchisees was allowable, and whether service tax paid on rent for retail outlets qualified for Cenvat credit. The appellant contended that goods were transferred to franchisee showrooms on a stock transfer basis, where they remained the property of the company until sold to customers, making the franchisee outlets the place of removal. It was also argued that sales commission represented sales promotion services and that rent paid for franchisee outlets had a direct nexus with the sale of the manufactured goods.
