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tb1.4.: F. NO.
V.32/15-08/Choksi Organics/ADC/OA-I/2014Wall' *1 Ft-GI:
Date of Order : 20.05.20147111 Wi#
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Date of Issue : 20.05.2014Gant rilitF / Passed by: Shri Sameer Chitkara, ADDITIONAL COMMISSIONER *******************************************************************
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Any person deeming himself aggrieved by this Order may appeal against this order in Form E.A.1 to Commissioner (Appeals), Central Excise, Central Excise Bhavan, Near Government Polytechnic, Ambawadi, Ahmedabad -15 within sixty days from date of its communication. The appeal should bear a
court fee stamp of Rs.2.00/- only.
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The Appeal should be filed in form No. E.A.-1 in duplicate. It should be filed by the appellants in accordance with provisions of Rule 3 of the Central Excise (Appeals) Rules, 2001. It shall be accompanied with the following:
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ICopies of the Decision (one of which at least shall be certified copy of the order appealed against) or copy of the said Order bearing a court fee stamp of Rs.2.00/-.
TIO-i/Reference :
Show Cause Notice. F.NO. V.32/15-08/Choksi Organics/ADC/OA-I/201 4 dated 03.03.2014
issued
to M/s Choksi Organics Pvt. Ltd; (100% EOU) Plot No. 320, Phase-I1, GIDC, Vatva,BRIEF FACTS OF THE CASE:
M/s. Choksi Organics Pvt. Ltd;(100% EOU), situated at Plot No. 320/1, Phase-II,
GIDC, Vatva, Ahmedabad -382 445 (hereinafter referred to as the "the said assessee")
are registered with the Central Excise Department having Central Excise Registration No.
AABCC4628CXM001 for manufacture of S.O.Dyes falling under Chapter 32 to the first
schedule of the Central Excise Tarrif Act, 1985. They have also been granted License No.
KASEZ/100% EOU/11/20/2006-07/7410 dated 08.09.2006 under Section 58 of the
Customs Act, 1962 as private warehouse for storage of imported items without payment
of duty on the importation or re-warehousing thereof and permission to manufacture
under Bond under Section 65 of the Customs Act, 1962.
2.
Whereas it appeared that the said assessee wrongly taken the Cenvat credit of
Service Tax paid on Commission paid to commission agent for sale of finished goods
cleared to their customers during the period
from January 2010 to March, 2011(Covering the whole period from 2008-09 to 2012-13).The summary of wrongly
availed Cenvat Credit of Service Tax is as under:-
Year SI. NO
RG 23A Pt.II Entry No. Date on which Cenva Credit was taken
Amount of Cenvat Credit fin Rs.] 2009-10 1 34 02.01.2010 247553/- 2 35 02.01.2010 635205/- 2010-11 1 4 05.05.2010 24142/- 2 6 03.06.2010 49146/- 3 12 06.08.2010 117572/- 4 16 06.10.2010 117577/- 5 21 05.12.2010 92563/- 6 25 06.01.2010 54156/- 7 27 04.02.2011 95619/- 8 31 03.03.2011 57215/- 9 33 31.03.2011 157204/-
Total Cenvat Credit Taken (In Rs.)- 16,47,952/-
3.
Whereas the information regarding availment of Cenvat Credit of Service Tax paid
on Commission paid to foreign commission agents for the period from 2008-09 onwards
was provided by the said assessee vide their letter dated 22.07.2013 [Sr. 1 of Annexure- "
I " enclosed to the notice] in response to letter F.No.AR-111/DIV.111/Cenvat Credit
S.Tax/2012-13 dated 13-03-2013 issued by the Superintendent, Central Excise,
Range-III, Division-Ill, Ahmedabad-I. In the said letter the said assessee provided the year
wise/entry wise details of the total cenvat credit taken to the tune of Rs.16,47,9521-.
4.
Hon'ble High Court of Gujarat in case of Commissioner of Central Excise,
Ahmedabad-II V/s. M/s. Cadila Health Care Ltd., 2013 —TIOL-12-HC-AHM-ST dated
18.10.2012 & 07.11.12 has held that the "commission agent is directly concerned with the
sales rather than sales promotion and as such the service 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(/) of the Cenvat Credit Rules 2004, Consequently, Cenvat Credit would not be admissible in respect of the commission paid to foreign agents".
5. The definition of the term "input service" as given at Rule 2(I) of Cenvat Credit Rules, 2004, is reproduced as under:-
"input service" means any service,-
(i) used by a provider of taxable service for providing an output service; or (ii) used by the 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 setting up, modernization, 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, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal;
6. The definition of input service fixes the meaning of that expression and the
services, used by the manufacturer, are required to have a nexus with the manufacture of the final product and clearance of the final product up to the place of removal. Place of removal is well defined in Section 4(3)(c)of the Central Excise Act,1944 and the services
which are enumerated in the inclusive clause, which applies both, in the context of the provider of output services as well as the manufacture, cannot be read
de hors
the meaning of input service under Rule 2(I) of Cenvat Credit Rules,2004. Therefore, all the activities relating to business, which are input services used by the manufacturer inrelation to the manufacture of final product and clearance of the final product from the place of removal alone would appear to be eligible. After the final products are cleared from the place of removal, there will be no scope for subsequent use of service to be treated as input services. Therefore, services utilized beyond the stage of manufacturing
and clearance of the goods from the factory cannot be treated as input services. Thus, it appeared that for the purpose of ascertaining the admissibility of Cenvat Credit on services, the nature of service availed should be in consonance with the above parameters. Hence, the said assessee appeared to have wrongly availed Cenvat Credit of Service tax paid on the commission paid to commission agent for sale of finished goods cleared to their customers contrary to the provisions of Rule 3 of Cenvat Credit Rules, 2004 read with Rule 2(/) (ii) of the Cenvat Credit Rules, 2004, which needs to be recovered from them alongwith interest.
7. Further, the provisions of Rule 3(1) of Cenvat Credit Rules, 2004, allowing a
manufacturer or producer of final product or a provider of taxable service to take Cenvat
Credit of various duties/taxes leviable under different provisions of law are read as under;- "RULE 3. CENVAT Credit. -
(1) A manufacturer or producer of final products or a
provider of taxable service shall be allowed to take credit (hereinafter referred to as
the CENVAT credit) of -
(i) (ii) (iii) (iv) (v) (vi) (via) (vii) (viia) (viii)
(ix) the service tax leviable under section 66 of the Finance Act; and
(x) (xa) (xi) paid on-
(i) any input or capital goods received in the factory of manufacture of final product or premises of the provider of output service on or after the 10th day of September, 2004; and
(ii) any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004,
including the said duties, or tax, or cess paid on any input or input service, as the case may be, used in the manufacture of intermediate products, by a job-worker availing the benefit of exemption specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 214/86- Central Excise, dated the 25th March, 1986, published in the Gazette of India vide number G.S.R. 547 (E), dated the 25th March, 1986, and received by the manufacturer
for use in, or in relation to, the manufacture of final product, on or after the
10th day of September, 2004."
8. Whereas, it appeared that services of foreign commission agent used by the manufacturer are used neither directly nor indirectly, in or in relation to the manufacture of final products. Therefore, the said assessee appeared to have wrongly availed Cenvat credit of Service Tax paid on commission paid to foreign agent which does not fall within the purview of definition of input service. The said service appeared to be availed by the
said assessee after the clearance of finished goods from the factory gate i.e. beyond the place of removal. Since, the services of foreign commission agent do not have any relation with the manufacturing activity and also do not appear to fall within the ambit of definition of input services as defined under Rule 2(i) of Cenvat Credit Rules, 2004, the manufacturer shall not be allowed to take credit on such ineligible service as per Rule 3 of
Cenvat Credit Rules, 2004.
9. Further, services of the foreign agent also do not appear to fall under the category of sales promotion. As per the definition of commission agent defined under clause (a) to
the Explanation under section 65(19) of the Act, a commission agent is a person who acts on behalf of another person and causes sale or purchase of goods. In other words, the commission agent appeared to be directly responsible for selling or purchasing
on behalf of another person and that such
activity cannot be considered as salespromotion. There appeared to be a clear distinction between sales promotion and sale. A
Therefore, the service provided by commission agent does not fall within the purview of the main or inclusive part of the definition of 'input service' as laid down in rule 2(/) of the
Rules and the said assessee does not appear to be eligible for CENVAT credit in respect of the service tax paid on commission paid to commission agents.
10. A Statement of Shri. Shah Jatin Bachchubhai, Manager of M/s. Choksi Colours
Pvt. Ltd;(100% EOU), situated at Plot No. 321/322, PhaseII, GIDC, Vatva, Ahmedabad -382 445, recorded on 16.08.2013 under Section 14 of Central Excise Act, 1944 [Sr. 2 of Annexure- " I " enclosed to the notice], wherein he interalia stated that they have availed Cenvat Credit of Service tax paid on the commission paid to the foreign agents for the period from January 2010 to March, 2011(Covering the whole period of 2008-09 to 2012-13); that they have never informed the Central Excise Department regarding
availment of Cenvat credit on Service Tax paid on commission paid to the foreign agent; that they have provided the details of the Cenvat Credit availed on the commission paid to the foreign agent for the period from 2008-09 to 2012-13,- that they have not availed any Cenvat Credit of Service Tax on the said service except they have provided the details vide their letter dated 22.07.2013.
11. Rule 9(6) of the Cenvat Credit Rules, 2004 stipulates that the burden of proof
regarding admissibility of Cenvat Credit shall lie upon the manufacturer or provider of output service taking such credit. In this era of self assessment, the onus of taking
legitimate Cenvat Credit has been passed on to the assessee in terms of the said rules. In other words, it is the responsibility of the assessee to take Cenvat Credit only if the same
is admissible. In the instant case, the credit taken in respect of services availed beyond the factory gate appeared to be inadmissible in as much as the same do not fall within the ambit of the definition of 'input services' as specified under Rule 2(/) of the Cenvat Credit Rules, 2004. Thus, it appeared that the said assessee knew that the services in respect of which they had taken Cenvat Credit were the services availed beyond the factory gate and related to sales which in turn did not have any relation whatsoever in or in relation to manufacture of goods. Further, the services provided by commission agent have been held to be concerned with sales and not sales promotion by the Hon'ble High Court of Gujrat in the case of CCE, Ahemedabad-Il vs. M/s Cadila Healthcare Limited, supra. Also Rule 2 (/) of Cenvat Credit Rules, 2004 defining what constitutes an input service, does not include Services related with sales in the definition of 'Input Services'.
12. Further, the said assessee, in this era of self assessment when onus of taking
legitimate Cenvat Credit is on to the assessee, took Cenvat Credit in violation of Cenvat Credit Rules. It appeared that the said assessee has taken the Cenvat Credit on the
services which do not qualify as 'input service' despite of knowing that the same have been availed beyond the factory gate and have not been used in or in relation to the
manufacture of final product and as such would not fall within the ambit of the definition of 'input service'. The said assessee, though, it has been expressly provided in Rule 9(6) of
Cenvat Credit Rules, 2004 that "... burden of proof regarding admissibility of the Cenvat
Credit shall lie upon the manufacturer..," took credit of Service Tax paid on the commission paid to the foreign commission agents which do not qualify to be included as
"input service" defined under Rule 2(I) of Cenvat Credit Rules, 2004. Thus, it appeared that the said assessee have contravened the provisions of the Cenvat Credit Rules, 2004
by suppressing the facts with intent to evade payment of duty in as much as (i) the
assessee has taken the Cenvat Credit on the services despite knowing that the same do not qualify as 'input service' (ii) the services have not been used in or in relation to the manufacture of final products and related to sales and not sales promotion and as such would not fall within the ambit of the definition of 'input service' (iii) by failing to discharge
the obligation cast on them under Rule 9(6) of the Cenvat Credit Rules, 2004 and (iv) by not informing the department about the availment of credit of Service Tax paid on the
commission paid to the foreign commission agents. Therefore, the said Cenvat Credit
amounting to Rs.16,47,952/- appeared to have been wrongly taken during the period
from January 2010 to March, 2011(Covering the whole period from 2008-09 to 2012-
13);and the same is required to be recovered by invoking provisions of extended period of five years contained in Section 11A(5) of the Central Excise Act, 1944 [erstwhile Section
11A(1) of the Central Excise Act, 1944 for the period covered up to 07.04.2011].
13. Rule 14 of the Cenvat Credit Rules, 2004 [Applicable during the relevant period i.e.
up to 31.03.2011] provides that where the CENVAT credit has been taken or utilized
wrongly or has been erroneously refunded, the same along with interest shall be
recovered from the manufacturer. In the instant case, the assessee appeared to have taken Cenvat Credit of Service Tax paid on the commission paid to foreign commission agents for sale of finished goods cleared to their customers during the period from
January 2010 to March, 2011. It also appeared that the said assessee has contravened
the provisions of Rule 2 of Cenvat Credit Rules, 2004 read with Rule 3 of Cenvat Credit
Rules, 2004 for credit taken of Service Tax paid on the commission paid to foreign commission agents. The said assessee had taken Cenvat Credit of an amount of
Rs.16,47,952/- during the said period. The said assessee is required to pay the said
amount of Rs. 16,47,952/- under Rule 14 of the Cenvat Credit Rules, 2004 [Applicable
during the relevant period i.e. up to 31.03.2011] read with provisions of erstwhile Section
11(A)(1) of the Central Excise Act, 1944 being the relevant provision of the law for the
period up to 31.03.2011. Rule 14 of the Cenvat Credit Rules, 2004 [Applicable during the
relevant period i.e. up to 31.03.2011] read
with
provision under erstwhile Section 11AB ofthe Central Excise Act, 1944 for the relevant period up to 31.03.2011, shall apply mutatis
mutandis for effecting recovery of interest.
14. In view of the above, it appeared that the said assessee has contravened the
provisions of Rule
2(l) read with Rule 3 of Cenvat Credit Rules, 2004 in
as much as they
had taken credit of Service Tax paid on services which do not qualify as 'input services';the burden of proof regarding admissibility of Cenvat Credit. Further, it appeared that the said assessee has suppressed the material facts regarding taking of Cenvat Credit of duty paid on services not covered under the definition of input services, by way of not indicating the same in their monthly/quarterly returns or in any other manner. Therefore, the assessee had rendered themselves liable for penalty in terms of Rule 15(3) of the Cenvat Credit Rules, 2004 (applicable during the relevant period i.e. up to 26.02.2010) & Rule 15(2) of the Cenvat Credit Rules, 2004 (applicable during the relevant period i.e. from 27.02.2010 to 31.03.2011) read with Section 11AC of the Central Excise Act, 1944 for the above said contraventions.
15. Therefore, the said M/s. Choksi Organics Pvt. Ltd(100% EOU); Plot No. 320/1,
Phase-II, GIDC, Vatva, Ahmedabad were required to show cause as to why :-
(i) wrongly availed Cenvat credit of Rs.16,47,952/- (inclusive of Education Cess and Higher Education Cess) for the period from January 2010 to March, 2011; should not be disallowed and recovered from them under erstwhile Section 11A(1) of Central Excise Act,1944 read with Rule 14 of Cenvat Credit Rules,2004
[Applicable during the relevant period i.e. up to 31.03.2011].
(ii) Penalty should not be imposed upon them under Rule 15(3) of the Cenvat Credit Rules 2004 [Applicable during the relevant period i.e. up to 26.02.2010] & Rule 15(2) of the Cenvat Credit Rules, 2004 [Applicable during the relevant period i.e. from 27.02.2010 to 31.03.2011] read with Section 11AC of the Central Excise Act,
1944.
(iii) Interest should not be charged & recovered from them for wrong availment of Cenvat Credit under Rule 14 of the Cenvat Credit Rules, 2004 read with the provisions of Section 11AA [erstwhile Section 11AB for the relevant period] of the Central Excise Act, 1944.
DEFENCE REPLY:
16. The assessee submitted their defence reply dated March, 2014 received on
21.03.2014 wherein they have stated that the charges and allegations purported to have been made in the Show Cause Notice are not in accordance with the legal position as stated under the prevalent law and self-contradictory.
16.1 That extended period of limitation cannot be invoked in their case as the entire activity was known to the department and the details of cenvat credit taken by them were furnished along with the monthly returns. Further there was no deliberate intention on part of the assessee to either not disclose correct information or to evade the payment of any tax.
16.2 The assessee has contended that the eligibility for availing credit is governed by
the provisions of Rule 3 of CCR. As per sub-rule (1) of Rule 3, credit of Service tax paid
on any input service is inter alia eligible as Cenvat Credit. As per the statement of Mr. Joshi, the commission agents scrutinize potential customers, meet with such potential customers, market the product manufactured by them and procure requisite orders from
the customers and are therefore a link between the customers and them. Therefore commissions play an important and integral role in the sales promotion and busiess of the
assessee.
16.3 That when the definition of input service envisaged under Rule 2(/) of CCR
specifically includes the two parts:-
i. used by a provider of taxable service for providing an output service or;
ii. used by the manufacturer which are directly or indirectly used in or in relation to the manufacture of final products, the services which are used for clearance of the
final products up to the place of removal;
and which inter alia, includes services like advertisement or sales promotion and market research, storage up to the place of removal, procurement of inputs.
In the definition above, the first part is restrictive in scope but the second part i.e. inclusive part expands the scope much beyond the coverage of first part. Further the
inclusive part itself is of two sub-parts. The first sub-part gives some instructions i.e. it is illustrative whereas the second sub-part covers all services used in relation to
'activities relating to business, such as Here 'in relation to' widens the scope of
definition.
16.4 that there is no qualification to the word 'activities'. There is no restriction that
activities relating to business should be relating to only main activities or essential activities and all activities relating to business fall within the definition of 'input service'.
16.5 that the allegation made in para 12 of the subject notice is misconceived as Rule 9 (6) of the said Rules provide that the manufacturer has to maintain proper records for receipt and consumption of service along with the value, tax paid and from the person from whom input service tax has been procured. They have taken cenvat
credit based on the challans issued by the ISD. As such the allegation of contravention
of Rule 9 (6) of the said rules is not tenable.
16.6 That Hon'ble High Court in the case of CCE, V/s. Cadila Healthcare Ltd. has dealt with the commission paid to the foreign agents. The Hon'ble court has further recorded the observation of the adjudicating authority who has referred to the definition of
commission agent as defined under clause (a) to the explanation under section 65(19) of
the Finance Act, 1944 as a person who acts on behalf of other persons and causes sale or purchase of goods. In their case, they generally enter into an agreement with their local sales agent. The local agents are directly responsible for selling their goods for which a
commission is
paid to them. The said observation of the
adjudicating authority has not
been challenged by the department and therefore the said observation has attained16.7 That the CBEC vide their Circular No. 943/4/2011 dated 29.04.2011 has also clarified that credit is admissible on the services of sale of dutiable goods on commission basis. The said Circular was not brought to the notice of the Hon'ble court and therefore the said decision of the Hon'ble High Court is per incuriam.
16.8 That they have rightly availed the cenvat credit for sale of goods and therefore
there is no question of wrongful availment of credit. Therefore, the interest under the provisions of Rule 14 read with Section 11AB of the Act cannot be recovered and since
they have not contravened any provision of the act, no penalty under Rule 15 of the CCR read with Section 11AC of the Act can be imposed.
The said assessee relied upon various citations in support of their defence and also requested to vacate the show cause notice on the basis of foregoing submissions.
PERSONAL HEARING:
17. The personal hearing in the matter was held on 01.05.2014, wherein Shri N. K.
Tiwari, authorized representative of the said assessee appeared on their behalf and reiterated the stand taken by them in their written submission dtd. March, 2014. and requested to decide the case on its basis.
DISCUSSIONS AND FINDINGS:
18. I have carefully gone through the case records and both written and oral
submissions made by the assessee in their defense. From the facts of the case on
records, I find that the basic issue to be dealt with in the impugned show cause notice pertains to admissibility of Cenvat credit taken and utilized by the said assessee on
service tax paid on commission paid to their agents for sale of their finished goods.
19. I further find that as per the information called for by the Range Superintendent, the
said assessee has availed Cenvat credit of service tax paid on commission paid to their sales commission agent to the tune of Rs. 16,47,952/- for the period from 2009-10 to
2010-11. The said Cenvat credit is alleged to have been wrongly availed by the said assessee mainly on the ground that the service provided by their commission agent does not fall within the ambit of definition of "input service" as provided under Rule 2(/) of the CCR, 2004. As such, the said assessee is not entitled to the Cenvat credit of service tax paid on such service provided by the commission agent for sale of their finished goods. 20. I also find that Hon'ble High Court of Gujarat in case of Commissioner of Central
Excise, Ahmedabad-II V/s. M/s. Cadila Health Care Ltd., 2013 —TIOL-12-HC-AHM-ST,
while dealing with the issue of admissibility of service tax paid on commission paid to overseas agents as Cenvat credit has observed as under:
"(vi) As noted hereinabove, according to the assessee the services of a commission agent would fall within the ambit of sales promotion as envisaged in clause (i) of section 65(19) of the Finance Act, 1994, whereas according to the appellant a
commission agent is a person who is directly concerned with the sale or purchase of goods and is not connected with the sales promotion thereof. Under the circumstances, the question that arises for consideration is as to whether services rendered by a
commission agent can be said fall within the ambit of expression 'sales promotion'. It would, therefore, be necessary to understand the meaning of the expression sales
promotion.
(vii) The expression 'sales promotion' has been defined in the Oxford Dictionary of Business to mean an activity designed to boost the sales of a product or service. It may
include an advertising campaign, increased PR activity, a free-sample campaign, offering free gifts or trading stamps, arranging demonstrations or exhibitions, setting up
competitions with attractive prizes, temporary price reductions, door-to-door calling, telephone selling, personal letters etc. In the Oxford Dictionary of Business English, sales promotion has been defined as a group of activities that are intended to improve sales,
sometimes including advertising, organizing competitions, providing free gifts and samples. These promotions may form part of a wider sales campaign. Sales promotion
has also been defined as stimulation of sales achieved through contests, demonstrations, discounts, exhibitions or tradeshows, games, giveaways, point-of-sale displays and merchandising, special offers, and similar activities. The Advanced Law Lexicon by P. Ramanatha Aiyar, third edition, describes the term sales promotion as use of incentives to
get people to buy a product or a sales drive. In the case of Commissioner of Income-tax v.
Mohd. lshaque Gulam, 232 ITR 869, a Division Bench of the Madhya Pradesh High Court
drew a distinction between the expenditure made for sales promotion and commission
paid to agents. It was held that commission paid to the agents cannot be termed as
expenditure on sales promotion.
(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 included 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(/) 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 follow 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".
(x) For the reasons stated hereinabove, this court is unable to concur with the
contrary view taken by the Punjab and Haryana High Court in Commissioner of Central
Excise, Ludhiana v. Ambika Overseas (supra). Insofar as this issue is concerned, the
question is answered in favour of the revenue and against the assessee.
Thus in light of the above decision of Hon'ble High Court, I have no hesitation to hold that the said assessee is not eligible for Cenvat credit of service tax paid on
commission paid to the foreign commission agents.
21. I further find that the assessee has argued that they had a bona fide belief regarding admissibility of credit on the aforesaid services on the basis of various rules and
circulars.
22. In this regard, I agree to the argument of the assessee to the effect that there was no malafide intention on their part in light of the fact that till the contradictory view was taken by Gujarat High Court in case of M/s. Cadila Healthcare Ltd. (supra), the
admissibility of Cenvat credit on service tax paid on commission paid to such commission agents was ruled in favour of the trade by various Tribunals and also Hon'ble Punjab and Haryana High Court. It is also evident that CBEC in their aforesaid Circular has also clarified that the Cenvat credit was admissible on services of commission agents. Their action of availing Cenvat credit in question at the relevant time was thus in accordance
with such circular and case laws. Thus, in light of these facts, I tend to hold that there was no suppression of facts or willful misstatement or ill-intention on part of the assessee and
as such none of the ingredients of section 11A of CEA'1944 enabling invocation of extended period were present in this case. Accordingly, I hold that extended period cannot be invoked in this case and the demand is to be limited to normal period only. Considering the date of issue of present show cause notice as 03/03/2014, the demand
can be restricted only for the period from February, 2013 till 03/03/2014.
23. Having held that the cenvat credit for the period from February, 2013 till 03/03/2014 is not admissible to them and is liable to be recovered, I find from the show cause notice that they have not availed and utilized any cenvat credit on Service Tax paid on commission paid to commission agent for sale for this period. Therefore no amount of wrongly availed cenvat credit during the period from February, 2013 till 03/03/2014
remains to be demanded.
24. Since there is no demand of wrongly availed cenvat credit during the period from August, 2012 till March, 2013, there arises no question of interest liability and
penalty.
ORDER
I drop the proceedings initiated with show cause notice F.No. V.32/15-08/ADC/Choksi Organics/OA-I/2014 dated 03/03/2014 in above manner.
The Show cause Notice issued to M/s Choksi Organics Pvt. Ltd,(100% EOU) Plot No. 320, Phase-II, GIDC, Vatva, Ahmedabad vide F.No. V.32/15-08/Choksi Organics/ADC/OA-I/2014 dated 03-03-2014 stands disposed of in above manner.
2 •
11,
(Sameer Chitkara)
Additional Commissioner Central Excise, Ahmedabad-I
F. No. V.32/15-08/Choksi Organics/ADC/OA-I/2014 Date: 20/05/2014.
By Registered Post A.D.
To,
M/s. Choksi OrganicsPvt. Ltd;(100% EOU) Plot No. 320, Phase-II,
GIDC, Vatva, Ahmedabad
Copy to:
1. The Commissioner C.Ex., Ahmedabad-I
2. The Assistant Commissioner, Central Excise, Division-III, Ahmedabad-I. 3. The Superintendent, Central Excise, AR-Ill, Division-III, Ahmedabad-I.
N/4( The Superintendent (Systems) C.Ex., A'bad-I
5. The Assistant Commissioner, C.Ex. (TAR), A'bad-I 6. The Deputy Commissioner C.Ex. (RRA), A'bad-I 7. Guard File
