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1 cm lwi, NT% AntZ1 3FIK 3TFICEMT-44 OFFICE OF THE COMMISSIONER Of CENTRAL EXCISE, AHMEDABAD4 awer4t 3FITC er sig, % ei4trich RIR CENTRAL EXCISE BUILDING, NEAR GOVT. POLYTECHNIC 9 3itrdrity 3rerar , AMBAWADI, AHMEDALW Int: F. NO. V.84/15-24/Ferromatik/ADC/0A-1/2014 Tr *Ca: Date of Order : Tft a14113e Date of Issue : rata" / Passed by: Dr.Manoj Kumar Rajak, ADDITIONAL COMMISSIONER ******************************************************************* 2W 317Ē71 A./Order-In-Original No.: 40/0C-I Ahmd/ADOMKR/2014 **************************************************************** srra 37r cd-dai (Zit) ft-dt) itlatte strav 77 t 3t1c11 c q * FA-cc w3ra *r cm% t I This copy is granted free of charge for private use of the person(s) to whom it is sent. q12, en wfycf 71. Wall' a Tad wt 37iTZ" 317,Td" chid!' t, a1 ag 311e1T fdad (3ita), 4,0-41q 6041C 4,0-414 ic F, telt, red-15 W1 T.V.-1 a1 3iittB" ar.91'd t I itrti EfRIWIT arrtsr (-Mier 3rerw 311MT 33,1 3TW cuir wirfr*1* *r diflisr Strat aiii *r e I rfrcr Tqv 2.00/- rqicileiq- sr aar slcrd Taav 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. 39-r1 31-$I7.7 Strdtlt E Sri -km: R. Lv.-1 3 rfitra oiklr qi2kr e1+4 3r414 t.1; ( ) f?94-0a cif, air 3 t 37-4er * IRWA311 Frre-tr Itcr oytr.v I ratirru %*Dfitra ai awaa 1%-armrcr :

2 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, It shall be accompanied with the following: f ita Copy of the aforesaid appeal. $"fnifi sirozry # V 3.# altalf *if snii1b'ra- M1 1c 31-a TAI ftfri ra bis RIM * F 641-rf wait A1 3 (PrZf i1 lu tivi F 2.00/- re11 441e1e1 fame Z1 F-41 V014 I Copies 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/-. It *Reference : qlkui CeTt Tielf EFTA Show Cause Notice. F.NO. V.84/15-24/Ferromatik/ADC/0A-1/2014 dated issued to M/s Ferromatik Milacron India Private Ltd., Plot No.93/2 & 94/1, Phase-I, GIDC, Vatva, Ahmedabad.

3 BRIEF FACTS OF THE CASE 1 M/s. Ferromatik Milacron India Private Ltd., Plot No.93/2 & 94/1, Phase-I, GIDC, Vatva, Ahmedabad (herein after referred to as the assessee") are engaged in the manufacture of Injection Moulding Machine and spares thereof falling under Chapter 84 of the First Schedule to the Central Excise Tariff Act, 1985 and having Central Excise Registration No.AABCC0881DXM001. The said assessee is also availing the benefit of Cenvat Credit Scheme as envisaged in the Cenvat Credit Rules, It appeared that the said assessee had availed Cenvat Credit of Service tax paid on Commission paid to foreign agents amounting to Rs. 11,93,364/- during the period from April-2013 to December The credit of service tax paid on Commission paid to foreign agents was not available to the said assessee as the service provided by commission agents was not covered under the definition of 'input service' under Rule 2(1) of the Cenvat Credit Rules, The definition of the term "input service" as given under Rule 2(I) of the Cenvat Credit Rules, 2004 is reproduced as under:- "(I) "input service" means any service, - (i) used by a provider of taxable 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 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 up to 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 secufity, inward transportation of inputs or capital goods and outward transportation up to the place of removal; " 4. 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 upto 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(1) of Cenvat Credit Rules, Therefore, all the activities relating to business, which are input services C>1 used by the

4 Page 2 of 19 40/CX-I Ahmd/ADOMKR/2014 manufacturer in relation to the manufacture of final product and clearance of the final product upto the place of removal alone would appear to be eligible. After the final products are cleared beyond 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, 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 commission paid to foreign sale 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(l) (ii) of the Cenvat Credit Rules, 2004 which was required to be recovered from them along with interest. 5. 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 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) (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 onany 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

5 Page 3 of 19 40/a-I Ahmdpwc/mKR/201 4 I (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, or input 2004,including the said duties, or tax, or cess paid on any input as the case may be, used in the manufacture of intermediate service, 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 received by the manufacturer for use in, or in relation March, 1986, and to, the manufacture of final product, on or after the 10th day of September, 2004." 6. Further, the assessee on request, had submitted the details of Cenvat credit of service tax paid on commission paid to foreign commission agents during the period from April-2013 to December-2013, which is as under:- Period Value Service Edu H.Edu.Cess Total tax 12% Cess 1% Service tax April May June July Aug Sep Oct Nov Dec Total % 7. It appeared that services of sales commission agent used by the manufacturer were neither used, 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 did 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 sales 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.

6 Page 4 of Further, services of the sales commission 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 Finance Act 1994, 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 appears to be directly responsible for selling or purchasing on behalf of another person and that such activity cannot be considered as sales promotion. There appears to be a clear distinction between sales promotion and sale. A commission agent is directly concerned with sales rather than sales promotion. Therefore, the services provided by commission agent do not fall within the purview of the main or inclusive part of the definition of Input service' as laid down in rule 2(I) of the Cenvat Credit Rules, 2004 and it appeared that the said assessee did not appear to be eligible for CENVAT credit in respect of the service tax paid on commission paid to foreign sale agents for sales of final product. The Hon'ble High Court of Gujarat in the case of Commissioner of Central Excise, Ahmedabad-II Vs. Cadila Health Care Ltd, 2013-TIOL-12-HC-AHM- ST, has held that "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(1) of the Cenvat Credit Rules, Consequently, Cenvat credit would not be admissible in respect of the commission paid to agents". It appears that the ratio of the decision of the Hon'ble High Court of Gujarat is squarely applicable for services of sales commission for foreign agents. 10. It was noticed that the said assessee had wrongly availed CENVAT Credit of service tax amounting to Rs. 11,93,364/- (for the period from April-2013 to December-2013) paid on the sales commission paid to the foreign agents for the finished goods (as detailed above). It appeared in light of legal provisions that the said assessee had failed to comply with the statutory provisions & procedure laid down for availing the CENVAT Credit in as much as they had availed cenvat credit of service tax paid on sales commission paid to the foreign agents. The service provided by sales commission agents is not included / defined as input service in rule 2(I) of Cenvat Credit Rules, Further 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-

7 Page 5 of 19 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 does not fall within the ambit of the definition of 'input services' as specified under Rule 2(I) of the Cenvat Credit Rules, 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 for sales promotion by the Hon'ble High Court of Gujarat in the case of Commissioner of Central Excise, Ahmedabad-II vs. M/s. Cadila Healthcare Limited, supra. Also, Rule 2(I) 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. Rule 14 of the Cenvat Credit Rules, 2004 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 said assessee had taken and utilised cenvat credit of service tax paid on commission paid to foreign sales agent during the period from April to December It also appeared that the said assessee had 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 commission paid to foreign sales agent, which did not qualify as the input services; Rule 9(6) of the Cenvat Credit Rules 2014 in as much as they had failed to discharge the burden of proof regarding admissibility of Cenvat Credit. Therefore, the assessee had rendered themselves liable for penalty in terms of Rule 15(1) of CCR The said assessee had taken and utilized of Rs. 11,93,364/- as cenvat credit of service tax paid on commission paid to foreign sales agent, during the said period. 13. A Show Cause Notice dated was therefore issued by the Additional Commissioner of Central Excise, Ahmedabad-I, from F.No.V.84/15-24/Ferromatic,/ADC/ 08A/ 2014 to M/s Ferromatik Milacron India Ltd., 92, Phase-I, GIDC Estate, Vatva, Ahmedabad calling them to show cause as to why::- (i) Cenvat credit of Rs for the period from April-2013 to December (inclusive of Education Cess and Higher Education Cess) wrongly availed

8 Page 6 of 19 by them as Cenvat Credit of Service Tax should not be disallowed and recovered under Rule 14 of Cenvat Credit Rules,2004 read with Section 11A(1) of Central Excise Act,1944. (ii) Interest should not be charged & recovered on wrong availment of Cenvat Credit under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11AA of Central Excise Act, and (Hi) Penalty should not be imposed upon them under Rule 15(1) of Cenvat Credit Rules, 2004 PERSONAL HEARING 14. Personal hearing in the matter was fixed and held on Shri Rajesh Soni, AGM (EXIM) appeared on behalf of the assessee He reiterated the defence reply dated to the Show Cause Notice dated submitted by the assessee at the time of personal hearing. DEFENCE SUBMISSION 15. Vide their defence reply dated , the assessee denied all the charges and allegations made in the SCN They quoted the definition of input service, amended w.e.f vide Notification No.3/2011-CENT, dated and submitted as under : The grounds of the show cause notice were incorrect and were result of incorrect appreciation of the provisions of law as well as precedent binding decision and the clarification given by the department from time to time. As regard services being not used in or in relation to manufacture, the definition of input service clearly provides for certain services to be specifically included in addition to those services which are used directly or indirectly, in or in relation to manufacture. In respect of the inclusive part of definition, the condition of use in relation to manufacture is not applicable. Furthermore, the use of the credit could also be in relation to clearance of final product upto the place of removal In the show cause notice, in respect of export, the proposition that the place of removal was the factory gate was incorrect. When the goods are sold on FOB basis for export, the place of removal is port and not the factory gate. This legal position was accepted by the department under circular issued by the CBEC No. c/7 97/8/2007-S.T. dated as well as by numerou

9 Page 7 of 19 judicial pronouncements, some of which are listed below. (i) POKARNA LTD. Reported in 2013 (30) SIR 379 (Tri - Bang.) (ii) KUNTAL GRANITES LTD reported in 2007 (215) ELT 515 (Tri. - Bang.) Thus, the very observation about the place of removal was incorrect The services were of agents located abroad for sale and market promotion, which ultimately resulted into sale orders and the removal of goods, was pursuant to such sale orders. Thus, the services were used and availed at the factory to sell the goods and was before in time of the removal The performance of activities of the agent, while rendering the services may be outside the factory but the place of performance was not relevant since it was the place of receipt and the actual availing of service viz: utilizing the service which was relevant In the present case, it was the performance of the agent in sales promotion and marketing which had borne the fruit in sale orders and such orders were received and acted upon by removing the goods from the factory; that the services were clearly, therefore, directly or indirectly, in or in relation to clearance of final product; that if orders were not received, no clearances would have been taken place; that unless and until the sales materialize, the manufacturing was pointless. No business entity would survive without sales. The sale is closely integrated and connected with activity of manufacturing. In fact, the whole of manufacturing activity is with the sole object of selling the manufactured goods. The sale is other side of the coin where one side is manufacturing It is now established and recognized principle that the input services can be availed even beyond the factory. The place of availing of service is not, per se, fatal to its availment. It is the nature of service and its nexus to manufacture or clearance which is relevant as per the definition The services of the agents had directly resulted into clearance of the goods and were, therefore, in or in relation to clearance of the goods from the factory. The credit was, therefore, clearly admissible in the main part of the definition. The observation that the services were availed beyond the place of removal was incorrect, both considering

10 Page 8 of 19 the nature of service as well as place of removal The inclusive part of the definition clearly envisages advertisement or sales promotion as the service which is eligible and covered within the definition The agents working abroad had clearly undertaken the activity of sales or market promotion of their product. Furthermore the agents were involved in promotion of sales /advertising / canvassing campaigns and supports for participation in local equipments exhibitions and were in the field of marketing of their various types of plastic processing machineries manufactured by them. They claimed to have enclosed representative samples of agreement with the agents wherein the scope of services to be provided by such agent was responsible for such activities (However no such samples were in-fact enclosed). They submitted that the consideration payable to such agents was calculated based on their performance and the performance was covered in terms of actual converting the sales promotion activities into order and was, therefore, based on the actual sales order and therefore, the services were in the nature of advertisement or market promotion and were covered within the definition They further submitted that the notice also proposed penalty and made allegations that the information was not given. Furthermore, there was no specific requirement, form or document, under which the information was to be communicated; that their Books of Accounts had been audited every year by Department and during the last audit only the subject credit was objected in light of the judgment of Hon'ble High court of Gujarat in case of Commissioner of Central Excise Ahmedabad-II V/s Cadila Health care ltd 2013 TIOL-12-HC- AHM-ST dated 18/10/12 and 7/11/12. Prior to this period the credits taken of service tax paid on commission activity was never been objected Relying upon the following decision, they submitted that the credit in similar circumstances had been permitted. (i) (ii) (iii) M.K. INDUSTRIES (31) STR 59 (Tn. - Ahmd.) DSCL SUGAR (25) SIR 599 (Tn. - Del.) Circular No. 943/4/2011-C.X., dated issued by the Board, and submitted that both the demand and the penalty were not sustainable. la%

11 Page 9 of 19 40/CX-1 Ahmd/ADC/NIKR/ They submitted that the actions taken by them were in conformity with the provisions of law and judicial precedents and the clarifications by the department. Such actions, therefore, cannot invite them any penal action. 18. They requested to withdraw the show cause notice for demand, interest and penalty. DISCUSSION AND FINDINGS 19. 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 foreign sales agents for sale of their finished goods. 20. I find that this is a periodical SCN issued for the period from April 2013 to December For the earlier period, i.e. from June 2008 to (March 2013), the SCN was issued for Rs.69,01,7081- to the assessee for wrongly availing Cenvat credit of service tax paid on commission paid to their sales agent.. I further find that in the impugned show cause notice on hand, the 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(I) of the Cenvat Credit Rules, 2004 ( here-in-after referred to as CCR, 2004). As such the said assessee is not entitled to the Cenvat credit of service tax paid on such service provided by the sales commission agent for sale of their finished goods. 21. I would first like to examine the definition of "input service" as defined under Rule 2(I) of CCR, 2004, which read as under: "input service" means any service, - (0 used by a provider of taxable 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 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 up to the place of removal, procurement of inputs, activities relating to business such as accounting, auditing, financing, recruitment and

12 Page 10 of 19 quality control coaching and training, computer networking, credit rating, share registry and security, inward transportation of inputs or capital goods and outward transportation up to the place of removal; " 21.1 In the present case, I find that the assessee had taken Cenvat Credit of Service Tax paid by them on commission paid to Foreign Sales Agents. I find that services of Sales Commission Agent used by the manufacturer are used neither directly nor indirectly, in or in relation to the manufacture of final products and as such this service does not fall within the purview of definition of input service. The said service had been 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 Sales Commission agent have no relation with the manufacturing activity and also do not appear to fall within the ambit of definition of input services as defined under Rule 20) of Cenvat Credit Rules, 2004, the manufacturer shall not be allowed to take credit on such ineligible services as per Rule 3 of Cenvat Credit Rules, Therefore, I find that the said assessee has wrongly availed Cenvat credit of Service Tax paid on commission paid to such commission agent Further, services of the sales commission agent also do not 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 Finance Act, 1994, 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 appears to be directly responsible for selling or purchasing on behalf of another person and that such activity cannot be considered as sales promotion. There has to be a clear distinction between sales promotion and sale. A commission agent is directly concerned with sales rather than sales promotion. Therefore, the services 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(I) of the Cenvat Credit Rules, 2004 and the said assessee is not eligible for CENVAT credit in respect of the service tax paid on commission given to commission agents 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

13 Page 11 of 19 40/CX-I Ahmd/ADOMKR/2014 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-ofsale 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

14 Page 12 of 19 acva-i Ahmd/ADC/MKR/2014 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 includes 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(I) 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 follows 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

15 Page 13 of 19 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 am of the view that the said assessee is not eligible for Cenvat credit of service tax paid on commission paid to the foreign sales agents. 22. I further find that Rule 2(I)(ii) of Cenvat Credit Rules, 2004, defines the eligible category of Services for availing credit. The said 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 manufacturer, cannot be read de hors the meaning of input service under Rule 2(I) of Cenvat Credit Rules, Therefore, all the activities relating to business, which are input services used by the manufacturer in relation to the manufacture of final product and clearance of the final product up to the place of removal alone would be eligible. After the final products are cleared beyond 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, 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. It is evident that the above service in question does not have any nexus with the manufacturing activities and as such does not fall within the ambit of definition of 'input service". 23. Further, I find that the said assessee could not establish nexus between the service availed by them and the manufacture of the finished excisable goods as per the ruling in the case of Vikram Ispat vis CCE, Raigad (16) S.T.R It was also held in the said case that any service to be brought within the ambit of definition of Input service' should be one which should satisfy the essential requirement contained in the main part of the definition. This requirement is equally applicable to the various items mentioned in the inclusive part of the definition as well. The Tribunal also held that no credit can

16 Page 14 of 19 be allowed unless the assessee provides evidence to establish the nexus between the services and the manufacture of the final products. Based on the above decision also, I find that the services in the subject issue are not falling within the definition of "input service". 24. I would also like to rely upon the decision in case of Commissioner of C.Ex., Chennai Vs Sundaram Brake Linings (19) S.T.R. 172 (Tri. Chennai) which is applicable in the present case. In the said case, Hon'ble CESTAT, Chennai, relying on a decision of Hon'ble Supreme Court in case of Maruti Suzuki Ltd. v. CCE, Delhi (240) E.L.T. 641 (S.C.), held that use of the input service must be integrally connected with the manufacture of the final product. The input service must have nexus with the process of manufacture. It has to be necessarily established that the input service is used in or in relation to the manufacture of the final product. One of the relevant tests would be the final product emerge without the use of the input service in question. In the present case the services of foreign sales agents were utilized beyond the factory gate, hence the Nexus theory and Relevance test as broadly discussed by the Hon'ble Supreme Court in case of Maruti Suzuki (Supra) is not established. 25. The Hon'ble Tribunal in the case of CCE, Nagpur Vs Manikgarh Cement Works (18) S.T.R. 275 has also held that to fall within the scope of definition of input service, a service must have been used in or in relation to the manufacture or clearance of final product, directly or indirectly. Moreover it is further held by Tribunal that the Hon'ble Supreme Court in the case of Maruti Suzuki Ltd. Vs CCE, Delhi (240) E.L.T. 641 (S.C.) has overruled the decision of the Bombay High Court in the case of Coca Cola India Pvt. Ltd. Vs CCE, Pune (15) S.T.R. 657 (Bom.) r (242) E.L.T. 168 (Born.). The Tribunal has also held that in view of the main part of definition that the decision of the Hon'ble Supreme Court in Maruti Suzuki (supra) though rendered in a case relating to 'inputs' is also applicable to a case of 'input service'. 26. I also note that in the case of Maruti Suzuki Vs Commissioner [2009 (240) E L T 641 (S.C.)], the Hon'ble Supreme Court has laid down that the nexus has to be established between the inputs or input service on one hand and finished goods on other hand. Even the larger Bench of Tribunal in the case of Vandana Global Ltd. Vs CCE, Raigad (253) E.L.T. 440 (Tri. -LB), has applied the decision of the Hon'ble Supreme Court in the case of Maruti Suzuki (supra) according to which credit in respect of input or input service is admissible only if it is integrally connected to the manufacture of the finished excisable goods.

17 Page 15 of Thus, in view of the above judicial pronouncements including the decision of Hon'ble High Court of Gujarat in case of M/s. Cadila Healthcare Ltd. as discussed in foregoing paras, I tend to hold that the assessee is not entitled to Cenvat Credit on the services in question and the same is required to be recovered from them along with interest Now coming to the submissions made by the said assessee in support of their defense, I find that the said assessee has argued on admissibility of the Cenvat credit in question. The assessee has contended that in respect of the inclusive part of definition, the condition of use in relation to manufacture is not applicable. In this regard, I find that as per the ruling in the case of Vikram!spat CCE, Raigad (16) S.T.R. 195 as discussed above, any service to be brought within the ambit of definition of 'input service should be one which should satisfy the essential requirement contained in the main part of the definition. This requirement is equally applicable to the various items mentioned in the inclusive part of the definition as well. They have also relied on the decision of Hon'ble Tribunal in case of M/s. Pokama Ltd. and M/s. Kuntal Granite and have contended that when the goods are sold on FOB basis for export, the place of removal is port and not the factory gate. In this regard, I find that in the present case, the assessee is preparing an invoice in the name of their foreign customer, thereby indicating a Sales transaction. It is not a situation where the goods are first cleared from the factory and a buyer identified subsequently. If the goods are cleared to a premise first from where they are to be sold on identifying a buyer, it can well be the place of removal. But having cleared the goods under an export invoice, this cannot be the situation. Therefore, the factory gate would be the place of removal in all cases of export clearances, irrespective of the same being sold on FOB basis. Further the place of removal is well defined in Section 4(3)(c) as mentioned above and no extension of its meaning can be given to the place of shipping port. I also find that the Hon'ble Tribunal in its order in the case of M/s Nirma Ltd. versus Commissioner of Central Excise, Bhavnagar reported at 2009 (13) S.T.R. 64 (Tri. - Ahmd.) has also affirmed the above views. In this connection, the relevant paras of the above decision are reproduced below: 3 The relevant facts, in brief, are that the appellant is exporting part of the goods manufactured by them and for the said purpose they are engaging services of CHA/Clearing and Forwarding Agent. The Original Authority held that the services cannot be considered as input services, as they have been rendered at the port in connection with the export, and decided that the credit of service tax is not available and accordingly denied the credit amounting to Rs. 68,829/ This order of the Original Authority has been upheld by the Commissioner (Appeals). 7. / have carefully considered the submissions from both sides. The decision in the case of M/s. Kuntal Granites Ltd. cited supra is in the context of granting of remission on excisable

18 Page 16 of 19 40/CX-i Ahmd/ADC/MKR/2014 goods which have been destroyed in a fire and the same has been rendered taking into consideration provisions of Section 5 of the Central Sales Tax Act also. The present case involves the services on which the tax paid are claimed as credit by treating them as input services. This case is squarely and directly covered by the decisions of the Tribunal cited supra by the Id. SDR. The observation of the Tribunal in the case of M/s. Excel! Crop Care ltd. (cited supra) is reproduced below: 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 8. In the light of above, the appeal is rejected In addition to above, I also find that the assessee themselves have contended that the services are of agents located abroad & their services are for sale and market promotion; their services have ultimately resulted into sale orders and the removal of goods is pursuant to such sale orders; thus, the services are used and availed at the factory to sell the goods and obviously is before in time of the removal. Thus, I find that the arguments of the assessee keeps swinging on different ends in as much as on one hand they claimed that the said service was availed by them before place of removal i.e. port of export and on other hand they claimed it to have been availed at factory. Apart from these, they have also accepted that agents are situated abroad which is obviously even beyond the port of export. Thus, I find that the arguments of the assessee with regard to the charges in the impugned show cause notice with regards to service in question being availed beyond place of removal, does hold any water and cannot be entertained. Apart from the above, when the service in question has been declared to be out of ambit of definition of input service', the question of it being availed before or after place of removal is of no much relevance I further find that the said assessee has argued that agents working abroad have undertaken the activity of sales or market promotion of their product and as such the said service is covered under the definition of 'input service' as defined under the statute and as such they have rightly availed the Cenvat credit thereon. In this regard, I find that the Hon'ble N.C. of Gujarat in their decision in case of M/s. Cadila Healthcare Ltd. (Supra) has considered the activities carried out by such sales commission agents in detailed and has given their verdict to the effect that activities undertaken by such sales commission agents are not covered under the definition of 'input service". The relevant portion of said decision of Hon'ble H.C. of Gujarat is also reproduced in foregoing paras and I would not like to repeat the same her

19 Page 17 of As regards, reliance on CBEC Circular dated 29/4/2011 (Para 17.2) pertaining to credit of Business Auxiliary Service on account of sales commission, I find that the admissibility of same has already been decided by Hon'ble H.C. as discussed above in case of M/s. Cadila Healthcare Ltd. (supra). Further, Hon'ble Apex court in case of CCE, Bolpur Vs Ratan Melting & Wire Industries (2008(231) ELT 22 (SC) has held that "when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court". 30. As regards reliance placed on decision of Hon'ble Tribunal in case of M/s. M.K. Industries 2013 (31) STR 59 (Tri.-Ahmd) and DSCL SUGAR 2012 (25) STR 599 (Tri-Del.), I find that as per the decision of Apex court in case of M/s Kamlakshi Finance Corporations Ltd., I am bound to pay the utmost regards to the judicial discipline and as such decision of Hon'ble H.C. of Gujarat relied upon by me is more binding than the decisions of Tribunals relied upon by the assessee. 31. In light of my in-depth findings supported by judicial pronouncements as discussed in foregoing pans, I am convinced to hold that the service of sales commission agent does not fall within the ambit of definition of "input service" as defined under the statute as discussed above and the said assessee was as such not entitle to Cenvat credit of service tax paid on commission paid to such sales agents. In view of the said facts, I find that the assessee had contravened the provisions of Rule 2(1) read with Rule 3 of the CENVAT Credit Rules, 2004 in as much as they had taken credit of service tax paid on service which did not qualify as 'input service'. 32. Further, I find that provisions of Rule 14 of the CCR, 2004 (as applicable during the period in question) clearly provides that where the Cenvat credit has been taken and utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacturer or the provider of output service and the provisions of section 11A and 11AA of the CEA, 1944 shall apply mute's mutandis for effecting such recoveries. In the instant it is evident that the said assessee has wrongly availed and utilized Cenvat credit in question. Thus, the said wrongly availed and utilized Cenvat credit is required to be recovered from them along with interest in terms of provisions of Rule 14 of CCR, read with Section 11A and Section 11AA ibid. 33. As regards proposal for imposition of penalty under Rule 15(1), the said assessee has contravened the provisions of CCR as discussed above and thereby, they are liable to penal action under Rule 15(1) of CCR, In this connection, I find that the case of Goodyear India Ltd. Vs Commissioner

20 Page 18 of 19 Of Central Excise, New Delhi (149) E.L.T. 618 (Tri. - Del.), Hon'ble CEGAT, Northern Bench, New Delhi, is applicable to the current case, wherein, it was held that penalty is indeed imposable on assessee, if they have not acted in a bona fide manner. In the instant case the assessee has availed the Cenvat Credit in contravention to the provisions of Cenvat Credit Rules, 2004 as discussed above. Hence, this act on the part of assessee certainly warrants imposition of penalty on them. 34. Thus, in light of the above, I hold that the CENVAT credit totally amounting to Rs. 11,93,364/- was wrongly availed by the assessee on the above mentioned Service during the period from April, 2013 to December, 2013 and the same is required to be disallowed and recovered from them in terms of the provisions of Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11A of the Central Excise Act, Further interest is also required to be charged on the Cenvat Credit wrongly availed and recovered from them in terms of the provisions of Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11AA of the Central Excise Act, The said assessee is also liable to penalty under Rule 15(1) of the Cenvat Credit Rules, 2004 for their contraventions as discussed above. 35. In view of my above findings, I pass the following order in the matter: ORDER (0 I disallow the CENVAT Credit amounting to Rs. 11,93,3641- ( Rupees Eleven Laths Ninety Three Thousand Three Hundred and Sixty Four only inclusive of Education Cess and Higher Education Cess) for the period from April, 2013 to December, 2013 and order to be recovered from M/s Ferromatik Milacron India Pvt.Ltd., Vatva, Ahmedabad in terms of the provisions of Rule 14 of CENVAT Credit Rules, 2004 read with Section 11A of Central Excise Act, ( H) I order to recover interest at the prescribed rates from M/s Ferromatik Milacron India Pvt.Ltd., Ahmedabad on the said wrongly availed Cenvat credit in terms of the provisions of Rule 14 of CENVAT Credit Rules, 2004 read with Section 11AA of the Central Excise Act, (iii) I impose penalty of Rs.3,00,000/- (Rupees three lac only) upon M/s Ferromatik Milacron India Pvt.Ltd., Ahmedabad under the provision of Rule 15(1) of the CENVAT Credit Rules, 2004.