Case Law Details
Beloorbayir Biotech Limited Vs Commissioner Of Central Tax (CESTAT Bangalore)
Sales commission is directly attributable to sales of the products. Any activity which amounts to sale of the products is deemed to be sales promotion activity in the normal trade parlance. The commission is paid on sales of the products/services with an intention to boost the sale of the company. In view of the same, the sales commission has a direct nexus with the sales which in turn is related to the manufacture of the products. It is to be understood that there need not be manufacture unless there is sale of product. To increase the manufacturing activity encouragement is being given for increased sales. Hence, the commission paid on sales becomes part of sales promotion resulting in increased manufacturing activity. So CENVAT credit is eligible on commission for doing the sales promotion activity.
FULL TEXT OF THE CESTAT ORDER IS AS FOLLOWS:-
The present appeal is directed against the impugned order dated 13.10.2017 passed by the Commissioner (A) whereby the Commissioner (A) has rejected the appeal of the appellant.
2. Briefly the facts of the present case are that the appellants are engaged in the manufacture and clearance of herbal extracts glucosamine and other drugs falling under subheading 1302 1919, 2815 1110 and 29420090 of Central Excise Tariff Act, 1985. During the audit of the financial records of the appellant by the internal audit team, it was observed that the appellant had availed CENVAT credit on „sales commission‟ paid to the commission Agents during the period of March 2010 to November 2014 which is ineligible. It was noticed from the CENVAT credit register, input/input service invoices that the appellant have availed CENVAT credit to the tune of Rs.2,04,542/- on sales commissions paid to M/s. Medilux Laboratories Pvt. Ltd. M/s. Deep Nutraceuticals, M/s. Shivas Farma Casa (P) Ltd. M/s. Shah Pharmaceuticals who are their „Commission Agents‟, involved in sales of the goods manufactured by the appellant. M/s. Beloorbayir Biotech Limited, Bangalore has agreed to pay commission to them on percentage basis on actual quantities sold and M/s. Medilux Laboratories Pvt. Ltd. M/s. Deep Nutraceuticals, M/s. Shivas Farma Casa (P) Ltd. M/s. Shah Pharmaceuticals are merely acting as agents for sale of goods manufactured and cleared by the appellant and not carrying out any sales promotional activity for the advancement publicity and/advertising of the said excisable goods, which means that the sales of the goods has not gone up by the efforts of M/s. Medilux Laboratories Pvt. Ltd. M/s. Deep Nutraceuticals, M/s. Shivas Farma Casa (P) Ltd. M/s. Shah Pharmaceuticals. Since service tax paid on commission paid to domestic agents does not fall under the scope and definition of input service, appellant appears to be liable to reverse the wrongly availed credit of Rs.2,04,542/- along with interest and penalty. On these allegations, a show-cause notice dated 6.8.2015 was issued to the appellant and after following the due process, the adjudicating authority vide Order-in-Original dated 20.1.2016 demanded the recovery of CENVAT credit availed on sales commission along with interest and penalty. Aggrieved by the said order, appellant filed appeal before the Commissioner (A) who rejected the appeal of the appellant and hence, the present appeal.
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