CGST, C&CE, Jaipur Versus M/s National Engineering Industries Ltd.
Central Excise
2018 (7) TMI 168 – CESTAT NEW DELHI – TMI
CESTAT NEW DELHI – AT
Dated:- 2-7-2018
Excise Appeal No. 51217 of 2018 (SM) – Final Order No. 52381/2018
Central Excise
Hon'ble Shri Ajay Sharma, Member (Judicial)
Shri K. Poddar, Authorized Representative (DR) – for the appellant
Ms. Sukriti Das, Advocate – for the respondent
ORDER
Per. Ajay Sharma
The instant appeal has been filed from the order-in-appeal No. 70 (SM) CE/JPR/2018 dated 21/02/2018.
2. The respondent/assessee are engaged in the manufacture of Ball Bearing falling under Chapter 84 of the Schedule to the Central Excise Tariff Act, 1985. A show cause notice dated 17/12/2005 was issued to the respondent alleging thereunder that they have wrongly availed Cenvat credit amounting to Rs. 15,74,528/- on the ineligible input service rendered by the sales agents/commission agents during the period December 2014 to October 2015. They
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nurture market for the respondent/assessee. Further, once the order is placed, to ensure that the same is taken to its logical course these activities are nothing but are sale promotion activities and, therefore, the element of sales promotion was very much involved in the services provided by these representatives. She further recorded that the insertion of the explanation vide Notification No. 02/2016 – CE (NT) dated 03/02/2016 in the definition of “input services” clarifying that “sales promotion” include services by way of sale of dutiable goods on commission basis and, therefore, the respondent/assessee is eligible to avail Cenvat credit of service tax paid on commission to sales agents/commission agents. Aggrieved the Revenue filed appeal before the Commissioner (Appeals) and the learned Commissioner (Appeals) vide impugned order dated 21/02/2018 rejected the appeal filed by the Revenue and held that in the light of clarification dated 29/04/2011 in Notification dated 03/02/2016
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e instant appeal are extracted as under :-
“Rule 2 (l) “input service” means any service, –
(i) used by a provider of [output 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”;
XXX XXX XXX
“Cenvat Credit Rules, 2004 – Second Amendment
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sed for payment of the Swachh Bharat Cess leviable under sub-section (2) of section 119 of the Finance Act, 2015 (20 of 2015):”.
[Notification No. 2/2016-C.E. (N.T.), dated 3-2-2016]”
6. According to learned DR, the explanation inserted in the Rule 2 (i) vide notification dated 03/02/2016 shall be effective only from the date of publication in the official gazette i.e. shall have only prospective application and that the learned Commissioner (Appeals) has erred in applying the said explanation retrospectively. He further submitted that there is no nexus between the sales/commission agent activities and the manufacturing activities and that manufacturing can be undertaking without availing the services of sales/commission agent.
7. The learned Advocate appearing for the respondent/ assessee on the other hand supported the impugned order passed by the learned Commissioner (Appeals).
8. Whether the explanation added in Rule 2 (l) of Cenvat Credit Rules, 2004 vide notification dated 03
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clared that sales promotion includes services by way of sale of dutiable goods on commission basis. In other way, Explanation to Rule 2(l) of Rules says in clear terms that there is no bar on availment of the Cenvat credit on sales promotion service by way of sale of dutiable goods on commission basis. Further, by inserting the Explanation in the Rule 2(l), it has confirmed the Board Circular and resolved the different views of the High Courts. Taking into circumstances under which the Explanation was inserted in Rule 2(l) of Rules, 2004 and consequence of the Explanation to extend the benefit to the assessee as per Board Circular, we hold that the Explanation inserted in Rule 2(l) of Rules, 2004 by Notification No. 2/2016-CX (N.T.) (supra) should be declaratory in nature and effective retrospectively”.
9. The said decision of Essar Steel India Ltd. (supra) has been further followed by this Tribunal in a batch of matter titled as M/s Mangalam Cement Ltd. vs. CCE, Udaipur vide final or
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at credit is admissible on the services of the sale of the dutiable goods on commission basis. The said circular was endorsed by the Central Government vide Notification No. 2/2016-CE (NT) dated 03/02/2016. In the case of Cadila Healthcare Ltd. (supra), the Hon'ble Gujarat High Court had not referred to the Circular dated 29/04/2011 and also there were divergent views by the Hon'ble Punjab & Haryana High Court in the case of CCE, Ludhiana vs. Ambika Overseas – 2012 (25) S.T.R. 348 (P&H). Considering the conflict in judgments of different High Courts and also the notification dated 03/02/2016, this Tribunal in the case of Essar Steel India Ltd. (supra) has held that the said notification should be considered as declaratory in nature and effective retrospectively. The relevant paragraph in the said decision is extracted herein below :-
“20. But, the Hon'ble Gujarat High Court in the case of Cadila Healthcare Ltd. (supra) was unable to concur with the contrary view taken by the Hon'ble
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sessee as per Board Circular, we hold that the Explanation inserted in Rule 2(l) of Rules, 2004 by Notification No. 2/2016-CX (N.T.) (supra) should be declaratory in nature and effective retrospectively”.
5. In view of the above settled position and law, we do not find any merits in the impugned orders. Accordingly, after setting aside the same, we allow the appeals in favour of the appellants”.
10. Thereafter again this issue came up before this Tribunal in a batch of matters in which this Tribunal vide final order Nos. 51412-51426 of 2018 dated 16/04/2018 while following its decision in the matter of National Engineering Industries Ltd. (supra) dismissed the appeal filed by the Revenue.
11. Explanation to Rule 2 (l) of Rules 2004 says it in clear terms that there is no bar on availment of Cenvat credit on sales promotion service by way of sale of dutiable goods on commission basis. During the period from 2008 onwards this issue has been considered by various appellate authorities
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