CESTAT, AHMEDABAD BENCH
Commissioner of Central Excise, Daman
Paras Motors Mfg. Co.*
ORDER NOS. A/10248 TO 10250/WZB/AHD/2013
APPEAL NOS. E/157 & 392/2011 & E/CO/83/2011
FEBRUARY 7, 2013
Rule 2(l) of the Cenvat Credit Rules, 2004 – CENVAT Credit – Input service – Commission Agent’s Services – In view of judgment in CCE v. Cadila Healthcare Ltd.  32 taxmann.com 105 (Guj.), service tax paid on commission paid to commission agents causing sale of goods is ineligible for input service credit [Paras 8 & 9] [In favour of revenue]
Rule 15 of the Cenvat Credit Rules, 2004 – CENVAT Credit – Confiscation and penalty – Since there were judgments in favour of assessee allowing Cenvat credit of commission agent’s services during material period and assessee was regularly filing periodical returns to authorities indicating therein availment of such Cenvat credit, availment of such credit out of bonafide belief as to eligibility did not warrant invocation of extended period of limitation and imposition of evasion penalty under Rule 15(2) – Hence, penalty imposed under Rule 15(2) of CENVAT Credit Rules, 2004 was set aside [Para 10] [In favour of assessee]
It was clarified by CBEC in Circular No. 943/4/2011-CX, dated 29-4-2011 that the said services are eligible as input service and amount to sales promotion. Probably, the assessee did not bring said CBEC Circular to notice of the Court. Even the Department did not do so and argued just contrary to what has been clarified by CBEC.
CCE v. Cadila Healthcare Ltd.  32 taxmann.com 105 (Guj.) [Para 8] followed.
CASES REFERRED TO
CCE v. Cadila Healthcare Ltd.  32 taxmann.com 105 (Gujarat) (para 3), CCE v. GTC Industries Ltd.  17 STT 63 (Mum – Cestat) (LB) (para 5) and Coca Cola India (P.) Ltd. v. CCE 2008 (223) ELT 69 (Tri. – Mum.) (para 5).
P.N. Sarvaiya for the Appellant.
1. All these appeals are directed against order in appeal No. SKSS /272/DMN/SDMN/2010-11, dt.08.12.10.
2. Appeal No. E/157/11 has been filed by the department against the impugned order only on the ground that the first appellate authority has extended the benefit of partial payment of penalty as per provisions of Section 11AC and their appeal seeks for enhancement of 100% penalty. Appeal No/E/392/11 is filed by the assessee for setting aside the impugned order which has denied them the Cenvat credit of the service tax paid on the commission paid to the commission agents. E/CO/83/11 is filed by the assessee against the appeal filed by the Revenue.
3. None appears on behalf of the appellant despite notice. On perusal of the records, I find that this matter was listed on the board on 23.10.12 & 14.12.12 on which dates the matter was adjourned on the request of the appellant and the matter got listed on 01.02.13. On that day, the consultant appeared for the appellant and he was informed about the decision of the Hon’ble High Court of Gujarat in the case of CCE v. Cadila Healthcare Ltd. 32 taxmann.com 105 and the copy of the same was served to him to study the same and make his submissions today. Today when the matter was to be heard, the ld. counsel is absent nor there is any request for adjournment. I take up the appeal filed by the appellant for disposal despite there being no representation from the appellant.
4. The relevant facts for consideration are the appellant herein has availed Cenvat credit of Service tax paid on the commission paid to the commission agents for the sale of their goods. It is also noticed that the appellant is to indicate the said availment of credit in their returns which has been filed with the authorities. The audit party took an objection that appellant is not eligible for such credit of the service tax paid on the commission paid to the commission agents as per the provisions of Rule 2(l) of the Cenvat Credit Rules, 2004. Accordingly, show-cause notice was issued which after due process of law was adjudicated and the adjudicating authority confirmed the reversal of the Cenvat credit availed of the service tax paid on the commission paid to the commission agents and also directed to pay the interest on the said amount and imposed equivalent amount of penalty under Section 15 of the Cenvat Credit Rules read with the Section 11AC of the Central Excise Act, 1944. Aggrieved by such an order appellant preferred an appeal before the first appellate authority who concurred with the views of the adjudicating authority and upheld the confirmed demands by the department by reducing the penalty 25% if the amount of penalty is paid within 30 days from the receipt of the order in appeal.
5. I perused the grounds of appeal raised by the appellant and also the cross objection filed by them. I find that the appellant has been contended that the Cenvat credit availed by them on the service tax paid on the commission paid to the commission agents is eligible as Cenvat credit has been upheld by the various decisions of this bench. It is also the contention of the appellant that the Larger Bench of the Tribunal in the case of CCE v. GTC Industries Ltd. 17 STT 63 (Mum.-Cestat) and Coca Cola India (P.) Ltd. v. CCE 2008 (223) ELT 69 (Tri.-Mum.) which indicates that any services which are rendered in connection with the business of the assessee, service tax paid on such amount is eligible for availing the Cenvat credit. As regards the penalty imposed, it is their claim of the appellant no penalty is imposable as appellant has been filing the returns with the authorities as a manufacturer indicating therein the Cenvat credit availed by them and there was no objection to the said such credit till the audit party took a different view.
6. Ld. Assistant Commissioner (A.R.), would submit that the judgment of the Hon’ble High Court of Gujarat in the case of Cadila Healthcare Ltd.(supra) has held that service tax paid on the commission paid to an agent is not eligible as Cenvat credit. He would submit that the department’s appeal is for the enhancement of penalty to 100% as the assessee has not divulged to department that they had availed Cenvat Credit of the service tax paid on the commission paid to the commission agents. It is also his submission that this suppression/ mis -statement of the facts in order to avail ineligible Cenvat credit.
7. I have considered the submissions made at length by the ld. A.R. and also perused the records.
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 Hon’ble 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.
9. This leads me to the interest part wherein I find that the appellant is liable to pay the interest on the amount of service tax credit taken by him and utilised during the material period. To that extent also, the appeal of the appellant is rejected.
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 bonafide belief as to eligibility to Cenvat credit as it is in relation to the business of manufacturing and selling. I find that the said bonafide 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.
11. The appeals are disposed of as indicated herein above i.e. assessee’s appeal allowed partly and department’s appeal is rejected and the cross objection filed by the assessee is also disposed of.
*Partly in favour of assessee