Commissioner Of Central Excise, Nashik vs Genom Boitech P. Ltd

(Arising out Order-in-Original Appeal No. AKP/63/NSK/2009 dated 30/09/2009 passed by the Commissioner of Central Excise (Appeals), Nashik)

For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial)

1. Whether Press Reporters may be allowed to see No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy Yes of the Order?

4. Whether Order is to be circulated to the Departmental Yes authorities?

Commissioner of Central Excise, Nashik Appellant

Vs.

Genom Boitech P. Ltd. Respondent

Appearance:

Shri Rakesh Goyal, Addl.Comm (AR) for the appellant Shri Dayananda K., CA for the respondent

CORAM:

Honble Mr. M.V. Ravindran, Member (Judicial)

Date of hearing : 20.03.2015 Date of decision : 28.04.2015

O R D E R No:..

This appeal is directed against order in appeal number AKP/63/NSK/2009 dated 30/09/2009.

2. Revenue is in appeal against the impugned order which has set aside the order in original vide which refund of the service tax amount paid on the commission to the agents, as the said services were utilised for export of goods.

3. Heard both sides and perused the records.

4. On perusal of the records, it transpires that the respondent herein is a 100% percent EOU and filed an application for refund of unutilised credit of duty paid on input and input services lying in balance at the end of July 2007, as per the provisions of Rule 5 of the Cenvat Credit Rules, 2004 read with notification number 05/2006  CE (NT) dated 14/03/2006. The refund claim was scrutinised and on scrutiny it was noticed that the entire amount of the refund claim was of the service tax paid on the services rendered by a commission agent who was rendering the services to the appellant for the sale of goods abroad. The adjudicating authority rejected the refund claim on the ground that the services were not used in the manufacture of the final products which were exported. On an appeal, the first appellate authority accepted the arguments made by the appellant assessee before him and set aside the order in original and allowed the appeal.

5. Revenue is aggrieved by the said order and on consideration of the submissions made by both sides and perusal of the grounds of appeal, I find that the issue is no more res integra. Honourable High Court of Gujarat in the case of Commissioner of Central Excise, Ahmedabad  II v. CEDILE Healthcare Ltd  2013 (30) STR 3 (Guj) has settled the issue wherein the Lordships have held as under.

5.2. (viii)?From the definition of sales promotion, it is apparent that in case of sales promotion a large population of consumers is targeted. Such activities relate to promotion of sales in general to the consumers at large and are more in the nature of the activities referred to in the preceding paragraph. Commission agent has been defined under the explanation to business auxiliary service and insofar as the same is relevant for the present purpose means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration. Thus, the commission agent merely acts as an agent of the principal for sale of goods and such sales are directly made by the commission agent to the consumer. In the present case, it is the case of the assessee that service tax had been paid on commission paid to the commission agent for sale of final product. However, there is nothing to indicate that such commission agents were actually involved in any sales promotion activities as envisaged under the said expression. The term input service as defined in the rules means any service used by a provider of taxable service for providing an output service or used by the manufacturer whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal and includes services used in relation to various activities of the description provided therein including advertisement or sales promotion.

Thus, the portion of the definition of input service insofar as the same is relevant for the present purpose refers to any service used by the manufacturer directly or indirectly in relation to the manufacture of final products and clearance of final products from the place of removal. Obviously, commission paid to the various agents would not be covered in this expression since it cannot be stated to be a service used directly or indirectly in or in relation to the manufacture of final products or clearance of final products from the place of removal. The includes portion of the definition refers to advertisement or sales promotion. It was in this background that this court has examined whether the services of foreign agent availed by the assessee can be stated to services used as sales promotion. In the absence of any material on record, as noted above to indicate that such commission agents were involved in the activity of sales promotion as explained in the earlier portion of the judgement, in the opinion of this court, the claim of the assessee was rightly rejected by the Tribunal.

Under the circumstances, the adjudicating authority was justified in holding that the commission agent is directly concerned with the sales rather than sales promotion and as such the services provided by such commission agent would not fall within the purview of the main or inclusive part of the definition of input service as laid down in Rule 2(l) of the Rules.

(ix)?As regards the contention that in any event the service rendered by a commission agent is a service received in relation to the assessees activity relating to business, it may be noted that the includes part of the definition of input service includes activities relating to the business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security. The words activities relating to business are followed by the words such as. Therefore, the words such as must be given some meaning. In Royal Hatcheries (P) Ltd. v. State of A.P., 1994 Supp (1) SCC 429, the Supreme Court held that the words such as indicate that what are mentioned thereafter are only illustrative and not exhaustive. Thus, the activities that follow the words such as are illustrative of the activities relating to business which are included in the definition of input service and are not exhaustive. Therefore, activities relating to business could also be other than the activities mentioned in the sub-rule. However, that does not mean that every activity related to the business of the assessee would fall within the inclusive part of the definition.

For an activity related to the business, it has to be an activity which is analogous to the activities mentioned after the words such as. What follows the words such as is accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security. Thus, what is required to be examined is as to whether the service rendered by commission agents can be said to be an activity which is analogous to any of the said activities. The activity of commission agent, therefore, should bear some similarity to the illustrative activities. In the opinion of this court, none of the illustrative activities, viz., accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security is in any manner similar to the services rendered by commission agents nor are the same in any manner related to such services. Under the circumstances, though the business activities mentioned in the definition are not exhaustive, the service rendered by the commission agents not being analogous to the activities mentioned in the definition, would not fall within the ambit of the expression activities relating to business.

Consequently, CENVAT credit would not be admissible in respect of the commission paid to foreign agents.

6. It can be seen from the above reproduced findings of their Lordships, the issue is no more open for agitation. All the arguments made by the learned Counsel appearing on behalf of the respondent assessee do not carry their case any further. Learned Departmental Representative was correct in submitting that assessee in this case is also not eligible for refund of the amount of service tax paid on the services of commission agent.

7. In view of the foregoing and authoritative judicial pronouncement, I find that the impugned order is not sustainable and is liable to be set aside and I do so.

8. Impugned order is set aside and appeal is allowed.

(Pronounced in Court on ..)

(M.V. Ravindran) Member (Judicial)

//SR

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