Commissioner of Central Excise, Ludhiana vs Ambika Overseas

Ajay Kumar Mittal, J.—This appeal filed u/s 35G of the Central Excise Act, 1944 by the revenue-appellant is directed against the order dated 20-7-2010 2012 (278) ELT 524 passed in Excise Appeal No. 1287 of 2008-SM(BR) by the Customs, Excise and Services Tax Appellate Tribunal, New Delhi (for short "the Tribunal"). The appellant has claimed that the following substantial question of law arises for consideration by this Court :

Whether the Hon''ble CESTAT was correct in holding that the respondent is entitled to avail the CENVAT credit on the services provided by Overseas Commission Agents (provided in relation to canvassing and procuring of orders) as input services despite the fact that the services of "overseas commission agents" are post removal services and do not fall under the ambit of the definition of "input service" given under Rule 2(1) of Cenvat Credit Rules, 2004, which defines "input services" as the services used in or in relation to the manufacture or clearance of final products from the place of removal?"

The facts, in brief, necessary for adjudication as narrated in the appeal, are that the respondent is engaged in the manufacture and clearance for export and home consumption of hand tools. The respondent had been paying overseas commission to its overseas commission agents who were causing sale of the exported goods, on payment of commission at an agreed percentage of business generated by them. As the commission agents were non-residents from outside India and had no office in India, the respondent being the receiver of their services was liable to pay service tax on the value of overseas commission paid by it to them for procuring business auxiliary services under Rule 2(1)(d)(iv) of the Service Tax Rules, 1994 (for short "the Rules"). The respondent was, thus, required to obtain service tax registration, pay service tax and file ST-3 returns under Rule 7 of the Rules. A notice was issued to the respondent to show cause why recovery of service tax of Rs. 8,205/- for the period from 4/04 to 12/04 be not made from it. It was, however thereafter, that the respondent wrote a letter dated 29-8-2006 to the Assistant Commissioner, Central Excise Division-I, Jalandhar intimating that it had deposited service tax of Rs. 4,20,592/- including the education cess of Rs. 8,246/-, along with interest of Rs. 45,127/- as its service tax liability for the period from 9-7-2004 to 30-6-2006. It was further stated in the letter that the same be treated as an intimation as required under sub-section (3) of Section 73 of the Finance Act, 1994 and that it had taken Cenvat Credit of the said service tax in its Cenvat account which would be utilized for payment of excise duty.

On scrutiny, it was observed that the respondent had wrongly availed the Cenvat Credit of service tax and thus, contravened the statutory provisions of Rule 2(1) read with Rules 3 and 4 of the Cenvat Credit Rules, 2004 (in short "the 2004 Rules"). It is how a show cause notice dated 26-10-2006 was issued to the respondent requiring it to submit its stand and further why the recovery of the wrongly availed service tax be not made from it. The adjudicating authority thereafter by order dated 31-10-2007 confirmed the recovery of Rs. 4,20,592/- besides imposing penalty of the equal amount, under Rule 15 of the 2004 Rules.

The respondent preferred appeal before the Commissioner (Appeals) challenging the order-in-original dated 31-10-2007. The Commissioner (Appeals) allowed the appeal and set aside the above order, vide order dated 27-3-2008.

The appellant-department preferred appeal before the Tribunal. The Tribunal upheld the order of the Commissioner (Appeals) by its order dated 20-7-2010.

Hence, this appeal by the appellant-Department.

The Tribunal while affirming the order of Commissioner (Appeals) and adjudicating the issue in favour of the respondent had come to the conclusion that the activities in respect of which cenvat had been filed, were pre-removal activities and the same could not be held to be post-removal. It was further observed that canvassing and procuring orders were in relation to ''sales promotion'' and would fall under sales promotion activities. These activities were, thus, included in the definition of input services and the assessee was entitled to benefit of cenvat credit of service tax. It would be advantageous to notice here the findings recorded by the Tribunal in para 6 of its order which are to the following effect :

I have carefully considered the submissions from both sides. The canvassing and procuring orders are activities preceding removal of the goods by the manufacturers. Without the firm order, the respondents were not expected to remove the goods to a foreign destination. Therefore, the submission of the learned DR that these activities are post-removal activities cannot be accepted. Further, the definition of the ''input services'' includes services used in relation to ''sales promotion'' and these activities can rightly be described as sales promotion activities. Sales promotion activities undertaken at given point of time also aims at sales of goods which are to be manufactured and cleared on future. Any advertisement given as a long term impact cannot be treated as post- clearance activities and, therefore, sales promotion has been specifically included in the definition of input services. As regards the other contention that the documents on which the respondent has taken the credit is not the prescribed document, it is to be noted that the respondent is not a service provider per se. They are basically the service recipients. They are required to pay service tax as a deemed service provider. Under these circumstances, the respondents have paid service tax using TR-6 challans and taken credit treating the said documents as documents covered by Rule 9(1) of the Cenvat Credit Rules, 2004. There is nothing irregular about it.

In the light of the aforesaid finding, learned counsel for the revenue was unable to justify that the claim of cenvat credit by the assessee was erroneous in any manner. No perversity or illegality could be shown by the learned counsel in the order passed by the Tribunal which may call for any interference by this Court. In view of the above, this Court is of the opinion that in this appeal, no substantial question of law arises for consideration by this Court. The appeal is accordingly dismissed.