Case Law Details
Varun Beverages Limited Vs Commissioner of CGST & CX (CESTAT Kolkata)
I find that the 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 paid on sales of the products/services with an intention to boost of the Company. The commission paid on sales becomes part of sales promotion resulting in increased manufacturing activity. The sales commission has a direct nexus with the sales, which in turn is related to the manufacture of the products. If there is no sale, there would not be any need to manufacture the products. Be that so as it may, to increase the manufacturing activity an encouragement is being given by way of sales commission for achieving increased sales.
I also observe that the Hon’ble High Court of Punjab & Haryana in the case of Commissioner of Central Excise, Ludhiana Vs. Ambika Overseas : 2012 (25) STR 348 ( P & H), had clearly held that the sale and manufacture are directed inter-related and the commission paid on sales needs to be accounted for as services related to sales promotion. Further, I follow the ratio of the decision of the Division Bench of this Tribunal in the case of Essar Steel India Ltd. cited supra, wherein the Tribunal, after discussing all the previous cases and Rules of interpretation, have held that the “Explanation” inserted in Rule 2 (l) of Cenvat Credit Rules, 2004 vide Notification No.2/2016-CE (N.T.) dated 03.02.2016 is declaratory in nature and is applicable retrospectively.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The facts of the case in brief are that the Appellant is engaged in the manufacture of water, aerated water, fruit pulp based drinks, Beverages in Bag (BIB) etc. classifiable under Central Excise Tariff Sub-Heading Nos.22019090, 22021010, 22011020, 22029020 & 21069050 of the Central Excise Tariff Act, 1985. The Appellant is availing Cenvat credit on various inputs, input services and capital goods in terms of the provisions as laid down under the Cenvat Credit Rules, 2004. The Appellant had entered into an agreement with M/s Nicco Parks and Resorts Ltd. for sale of their products from the latter’s premises. For this purpose, the Appellant paid upfront fees and also made payment based on quantity sold during the period from 1st April, 2015 to 2nd February 2016. The scrutiny revealed that the Appellant availed cenvat credit of service tax paid on invoices raised by M/s Nicco Park and Resorts Ltd. towards the sales commission, which accordingly to the show-cause notice, did not qualify as eligible input service.
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