Cenvat Credit- input materials and input services should be treated differently

Commissioner of Central Excise Vapi Versus M/s. Hindalco Industries Limited

Demand - Business Auxiliary Services and Goods Transport Agency services - Sales promotion connotes with promotion that supplements or coordinate advertising, promotional material, publicity, packing or a message issued to on behalf of the assessee s final products intended to increase the sales - it can be concluded that legislative intent in respect of inputs, for manufacture and input service, in case of manufacture, are to be treated differently and when input services are rendered in relation to the business activity, credit is admissible - The respondents are therefore eligible for the benefit of credit of service tax paid on the services rendered by the agent - Appeal is disposed of

No. - E/30 and E/CO/175 of 2010

Dated - July 22, 2011

Dr. P. Babu, J. For Appellant : Shri R.S. Srova, JDR   For Respondent : Shri Jigar Shah, Advocate   Per : Dr. P. Babu;   This appeal is filed by the Revenue against the order in appeal of the Commissioner (Appeal). To narrate the facts in brief, M/s. Hindalco Industries Limited is engaged in manufacturing goods and also registered under the category of Business Auxiliary Services and Goods Transport Agency services. They were also exporting excisable goods for which they paid the service tax on the ground commission paid to foreign parties under the category of Business Auxiliary Services. It came to the notice of the Revenue that they were availing cenvat credit amounting to Rs. 4,61,043/- for the period from April 2006 to July 2008 on commission paid to foreign parties since it appeared that they were not input services. The case was adjudicated and the original adjudicating authority dropped the demands. On appeal, Commissioner (Appeal) upheld the order in original. Commissioner (Appeal s) view was that the services rendered by their commission agents for procuring export orders fall under the category of sales promotion and hence eligible as input services. Sales promotion connotes with promotion that supplements or coordinate advertising, promotional material, publicity, packing or a message issued to on behalf of the assessee s final products intended to increase the sales. The Revenue relied upon the order in the case of M/s. Excel Crop Care Limited vs. CCE 2007 (7) STR 451 (Tri. Ahmd.) and it was held by the Tribunal that :-   6.2 The CHA services availed in respect of export does not have any nexus with the manufacture and clearance of the product from the factory. The business activities which are sought to be included in the extending arm of the definition, in my opinion, cannot include the services rendered at the port area. Therefore, the appeal on the aspect is rejected.   2. This view was also upheld by the Tribunal in the case of Nirma Limited vs. CCE, Bhavnagar 2009 (13) STR 64 (Tri. Ahmd.). This bench of the Tribunal considered the issue at length in the case of CCE Vapi vs. Nilkamal Crates & Bins 2010 (19) STR 431 (Tri. Ahmd.). In this case the facts of the case are identical and it was held as follows :-   4. In this case, department is in appeal on the ground that the respondent is not eligible for the benefit of credit of service tax paid on commission paid to the agent situated abroad in case of the exports made by them. The contention of the Revenue is that such service was rendered after the removal and it is beyond the place of removal. Therefore, the decision of the Tribunal in case of M/s. Metro Shoes P. Ltd. which had taken a view that any service rendered if it relates to the activities up to the place of removal, credit of service tax paid on such service, would be admissible is not applicable. .. .   3. Going through the order as cited above, it can be concluded that legislative intent in respect of inputs, for manufacture and input service, in case of manufacture, are to be treated differently and when input services are rendered in relation to the business activity, credit is admissible. It cannot be said that the service of the commission agent is not relatable to the business activity. I therefore have no doubt that commission agent would help in increasing the sale and render service in relation to the business activity. Therefore, the decision of the Hon'ble High Court of Mumbai in the case of M/s. Coca-cola India (P) Limited give credence to this view. The respondents are therefore eligible for the benefit of credit of service tax paid on the services rendered by the agent.   4. The appeal filed by the Revenue is therefore, devoid of merits and rejected. Cross objection filed by the respondents also gets disposed of.