CESTAT, NEW DELHI
Commissioner of Central Excise
FINAL ORDER NO. 803 OF 2011-SM(BR)(PB)
STAY ORDER NO. S/798 OF 2011 – SM (BR) (PB)
APPLICATION NO. E/STAY/941 OF 2011 – SM (BR)Online GST Certification Course by TaxGuru & MSME- Click here to Join
APPEAL NO. E/778 OF 2011-SM (BR)
NOVEMBER 1, 2011
1. After dispensing with the condition of pre-deposit of duty of Rs. 4,09,940 and penalty of identical amount, I proceed to decide the appeal itself inasmuch as the disputed issue stands decided in favour of the appellants by the precedent decision of the Tribunal.
2. After hearing both sides, I find that the appellants are engaged in the manufacture of sugar. For sale of their final product, they availed the services of the commission agent, and are paying Service tax on the said services under the category of Business Auxiliary Services. They availed the Cenvat credit of Service tax so paid by them on the services of commission agent. Revenue is of the view that they are not entitled to avail Cenvat credit inasmuch as commission agent services cannot be considered to be eligible cenvatable services. Accordingly, proceedings were initiated against the appellants by way of issuance of show cause notice dated 25-9-2009 raising demand of duty for the period 1-4-2007 to 30-8-2009. The show cause notice stand culminated into the impugned order passed by the original adjudicating authority and upheld by the Commissioner (Appeals). Hence, the present appeal.
3. The short question required to be decided is as to whether the service tax paid on commission agent services is available as Cenvat credit to the appellants by treating the same as input services in terms of Rule 2(l) of Cenvat Credit Rules, 2004. The lower authorities have held that (inasmuch as the said activities are post manufacturing and post clearance activities, they do not satisfy the definition of inputs services. On the other hand, it is the appellants contention that services of commission agent are, in fact, received prior to the clearance of goods, and it is based upon the orders procured by them, the goods were cleared from their factory. As such, the Revenue’s stand that the same are related to post clearance activities cannot be upheld. In any case, submits the learned advocate that there are number of Tribunal’s decision laying down that such activities have direct nexus with the business activities of the assessee and as such have to be treated as input services.
4. I find from the impugned order of the Commissioner (Appeals) that it is accepted fact that there are different orders of the Tribunal adopting two different views. He has accepted that the Tribunal’s decision in the case of CCE v. Bhilai Auxiliary Industries  21 STT 474 (New Delhi – CESTAT) holds commission agent services as eligible input services for the purpose of modvat, though he has preferred to rely upon the Single Member Bench decision in the case of Chemplast Sanmar Ltd. v. CCE LTU  29 STT 289 (Chennai – CESTAT) laying to the contrary.
5. I find that Tribunal’s decision in the case of Bhilai Auxiliary Industries (supra) stands passed before the decision in the case of Chemplast Sanmar Ltd. (supra). The said judgment in the case of Bhilai Auxiliary Industries (supra) relies upon the Division Bench judgment of the Tribunal in the case of Metro Shoes (P.) Ltd. v. CCE  10 STT 462 (Mum. – CESTAT) as also in the case of CCE v. Abhishek Industries Ltd.  stay order No. 1106 of 2007-Ex (PB), dated 23-10-2007 and the decision in the case of Chemplast Sanmar Ltd. (supra) has not taken note of either Bhilai Auxiliary Industries case (supra) decision or the Division Bench judgment in the case of Metro Shoes (P.) Ltd. case (supra) I also note that there are another Division Bench judgment in the case of Lanco Industries Ltd. v. CCE  22 STT 380 (Bang – CESTAT) laying down, after taking note of the Division Bench judgment in the case of Metro Shoes (P.) Ltd. (supra) that Service tax paid on commission agent in respect of sales made through such agent is admissible for Cenvat credit. It seems that the said Division Bench judgment in the case of Lanco Industries Ltd. (supra) escaped the attention of the Single Member Bench deciding the issue in the case of Chemplast Sanmar Ltd. (supra). Further, the Tribunal’s decision in the case of Cadila Healthcare Ltd. v. CCE  23 STT 224 (Ahd. – CESTAT) also held that the Foreign Commission agent service for sale promotion, are input services and credit on Service tax paid on the same is admissible. As such, I note that there are catena of judgment laying down that the Service tax paid on the commission agent services is available as modvat credit. As such, I hold that the impugned orders denying such credit are not sustainable.
6. Apart from the decisions as discussed above, I also take note of a recent Circular No. 943/4/2011-C.X., dated 29-4-2011 issued by the Board clarifying that even after the deletion of expression “activities related to business” from the definition of input services, the credit of Service tax paid on the sales promotion activities and on the services of sales of dutiable goods on commission basis would be admissible as credit. As such, it is the contention of the learned advocate that even after the activities related to business, stand deleted from the definition of inputs credit as per the Board’s Circular, the Service tax paid on commission on agent services would be available. However, he clarifies that period involved in the present case is prior to the amendment to the definition of input services, the precedent decision of the Tribunal would cover the disputed issue in his favour.
7. I had already held that impugned order is not sustainable on merits. Accordingly, the impugned orders are set aside and appeal is allowed with consequential relief.
8. Stay petition as also appeal gets disposed of in the above manner.