Shree Khedut Sahakari Khand vs Commissioners Of Central Excise

[ Arising out of OIA-CCEA-SRT-II-SSP-299-U-S-35A dtd 28/02/2013 Passed by Commissioners of Central Excise, Customs and Service Tax-SURAT-II ]

Shree Khedut Sahakari Khand Udyog Mandli Ltd - Appellant(s)

Vs

Commissioners of Central Excise, Customs and Service Tax-SURAT-II - Respondent (s)

Represented by :

Appellant(s) : Shri Rahul Gajera, Advocate Respondent (s) : Shri J Nair, Authorised Representative

For approval and signature :

Mr. P.M.Saleem, Hon'ble Member (Technical)

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

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

No 3 Whether their Lordships wish to see the fair copy of the Order?

Seen 4 Whether Order is to be circulated to the Departmental authorities?

Yes

CORAM :

Mr. P.M.Saleem, Hon'ble Member (Technical)

Date of Hearing / Decision : 20/07/2015

ORDER No. A/11119 / 2015 dtd 20/7/2015

Per : Mr.P.M.Saleem.

The issue before us in this matter is availing of Cenvat Credit of service tax paid on Sales Commission/Dalali (brokerage) and availing of Cenvat Credit of service tax paid on Sales Commission to various parties for selling/marketing of their finished goods.

2. The facts of the case are that, during the course of internal audit (EA 2000), it appeared that the Appellants had availed cenvat credit on service tax paid on Sales Commission/Dalali (Brokerage). The Appellants also availed cenvat credit of service tax paid on Sales Commission to various parties for selling/marketing of their finished goods. It further appeared that the Appellants were not entitled to avail service tax credit of the above said service since the said service was not defined as input service under the provisions of sub Rule (1) of Rule 2 of the Cenvat Credit Rules, 2004 read with Section 37(2) of Central Excise Act, 1944. The relevant extract of definition of the input service is reproduced below :

 Input service means any service, -

(i) used by a provider of taxable service for providing an output service; or

(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal;  2.1 From the definition of input service, it appeared that it did not include services provided by the Commission Agents as input service, used in or in relation to manufacture of finished goods. There did not appear to be any nexus between this type of service rendered and the manufacture of the finished goods of the Appellants either directly or indirectly i.e, such a service would not in any way affect the quality or quantity of the finished goods. The Appellants availed service tax credit on such services which could not be considered to be services used in or in relation to manufacture of finished goods.

2.2 Further, it appeared the Appellants had wrongly availed service tax credit of Rs 8,20,847/- from August, 2006 to November 2010 which was required to be recovered from them under the provisions of Rule 14 of the Cenvat credit Rules, 2004.

3. A Show Cause Notice dated 8.2.2011 was issued in this regard. The matter was adjudicated vide OIO dated 23.12.2011 confirming the demand of cenvat credit of service tax of Rs 8,20,847 under Rule 14 of the Cenvat Credit Rules, 2004.

3.1 Interest and equivalent penalty were also imposed by the Adjudicating Authority. The OIO was upheld by the Commissioner (Appeals) vide their impugned order. The assessee is in appeal before us against the said order.

4. Heard both the sides. The matter is no more res integra in view of the decision of the Honble High Court of Gujarat in the matter of CCE Ahmedabad II vs Cadila Healthcare Ltd [2010(17)STR.134(Tri.Ahmd)]. The same view was also taken by this Honble Tribunal in the case of CCE, Daman vs Paras Motors Mfg Co. [2013(31)STR.81(Tri.Ahmd)]. The Tribunal held as follows in the said decision:

 8. At the outset, I find that as regards the eligibility to avail Cenvat credit of the service tax paid on the commission to the commission agents, the same now stands settled by the judgment of the Honble High Court of Gujarat in the case of Cadila Healthcare Ltd. (supra) wherein their lordships have held that such service tax is ineligible for availment of Cenvat credit on this issue, on merit, I find that the appellant has no case and the appeal to that extent is rejected.

Respectfully following the said decision it is held that cenvat credit cannot be availed of the service tax paid on the Sales Commission. I, therefore, find that the appellants have no case on merit, and the appeal to that extent is rejected.

5. As regards penalty, it is seen that the this Honble Tribunal has held in the matter of Paras Motors Mfg Co. (Supra) as follows.

 10.?As regards the penalty imposed, I find both the lower authorities have imposed the equivalent amount of penalties on the appellant under Rule 15 of the Cenvat Credit Rules, 2004 read with provisions of Section 11AC of the Central Excise Act, 1944. I find the strong force in the contentions raised by the appellant in grounds of appeal, as to that during the relevant period, there were decisions which indicated that service tax paid on the commission to the commission agents is eligible for availment of Cenvat credit and accordingly appellant availed the Cenvat credit. It is also undisputed that the appellant is a manufacturer and was filing regular monthly ARE-1 returns to the authorities and indicating therein availment of such Cenvat credit. In my considered view, the action of the appellant in taking the Cenvat credit of the service tax to the commission agents could be out of bona fide belief as to eligibility to Cenvat credit as it is in relation to the business of manufacturing and selling. I find that the said bona fide belief of the appellant cannot be considered as erroneous and that too, to invoke the extended period of limitation for imposition of equivalent amount of penalty. In my view, the appellants have made out a case for setting aside the penalties imposed by the lower authorities. Accordingly, I set aside that portion of the order which imposes equivalent amount of penalty on the appellant under the provisions of Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. Following the same ratio, it is held that no penalty will be leviable in this case. The appeal to that extend succeeds.

6. In view of the above, the impugned Order-in-Appeal is modified to the above extend. The appeal is disposed in the above terms.

(Dictated and pronounced in the Court)

(P.M.Saleem) Member (Judicial) swami ??

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