OFFICE OF THE COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD4

Transcription

1 Gel erg 3ITZIWrip 3-0:11K M4 OFFICE OF THE COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD4 44Przl" ft1r, Linerdreict) rilrfr CENTRAL EXCISE BUILDING, NEAR GOVT. POLYTECHNIC 3TtalTarrit, 31WFWarK AMBAWADI, AHMEDABAD F.NO. V.84/15-24/ADC/Chamunda/0A-1/2013 ail i i21'altar: Date of Order : Ttt W4# FIRT: Date of Issue : gall! ref / Passed by: Sri Sameer Chitkara, ADDITIONAL COMMISSIONER ******************************************************************************* AnT 311t4PT #10rder-In-Original No.: 07/ADDITIONAL COMMISSIONER/20I4 ******************************************************************************* of Ezif4'a (zit) Tfi, 1:Krzi6 311tU 3 (3*) cldld 39RItar 1,1101 t I This copy is granted free of charge for private use of the person(s) to whom it is sent. Ezia" 571-3T1tU f#71v-d" cb ici1 ci6 * Z-I 3iTtU 31Tz1-47 (37 ), IC, 1Zf 6c41d, 31e 4=h artwartr, 3i e,-15 w-t Li 3i cif t I 64-cl 3.7r1W tr 'TT 31TtU Oa) 3T MT 3T MT sich C,bI,(1 wca - ch(o) r artra. J-116 Rc RC *t.a1.41 -rit Cr I T4:1-9T Tc /- ftw-e (boil 0.11 vritv I 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. 6c4.cl 31-crR 1;f16-41)- Aht,4 T. 5.V.-1 Qr art VritTr I 6.ki41 k e, T,c -ch (3ititg) Pe14-11c1A, Bela-1 3 t aWa3it s3-ic%c11(1 Tf-FT41-17 J11 0) ViltVI RT cr '44 el dal r+-41- : 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:.3ctd cri. I Copy of the aforesaid appeal. 1.1q *1 11t ied-41." (31,1) 3Trtu Qr crazrrf6ra - r v-rit(r D--4=rk fa-kw 3rc1M- amar 6c1-c1 31-rtu Q. awqr ;Tit' 1 l+1,-r 2.00/- r a-ziienem amzi- (4d T.1I1tV 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/-. T.f0-1/Reference : q,l.tul eic113it k-keieril F.NO. V.84/15-24/ADC/Chamunda/0A- 1/2013 dated issued to M/s Chamunda Pharma Machinery Pvt. Ltd., Plot No. 7602, Phase-IV, GIDC, Vatva, Ahmedabad.

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3 3 F.No. V.84/1 5-24/ADC/Chamunada/0A4/ BRIEF FACTS OF THE CASE: M/s Chamunda Pharma Machinery Pvt. Ltd., situated at 7602, Phase-IV, GIDC, Vatva, Ahmedabad (hereinafter referred to as the "assessee") are registered with the Central Excise Department having Central Excise Registration No. AABCC 1690 EXM001 and are engaged in manufacturing activity of manufacturing and exporting activity of Pharma Machinery etc. falling under Chapter 84 of Central Excise Tariff Act, They are also registered with Service Tax Department having Service Tax Registration No. AABCC 1690 EST001 as they are providing taxable services of Labour contractor, Bank Charges, Security, Courier etc. 2. Where as it appears that the said assessee is availing the Cenvat Credit on the inputs received in their factory and input services received by them and utilizing the same against payment of Central Excise duties as applicable on their clearance of Final products from the factory under the provisions of Cenvat Credit Rules, 2004 read with Central Excise Rules, Further it appears that the said assessee has taken the Cenvat credit of the Service Tax paid on Commission paid to foreign based commission agent for export sales of final products cleared to their customers by them during the period from the F.Y to F.Y The summery of wrongly availed Cenvat credit of Service Tax is as under:- CHAMUNDA PHARMA MACHINERY PVT LTD CENVAT CREDIT TAKEN OF SERVICE TAX PAID ON COMMISSION PAID FOR EXPORT SALES ANNEXURE 'A' MONTH AMOUNT BASIC EXCISE EDU H EDU TOTAL Cenvat Register RG23A Part-II Entry Date May /30/2008 May /30/2008 June /31/2008 July /31/2008 August 0 September /31/2008 October 0 November 0 December /31/2009 January /28/2009 February /31/2009 March 0 TOTAL MONTH AMOUNT BASIC EXCISE EDU H EDU TOTAL Cenvat Register RG23A Part-II Entry Date April May /30/2009 June /31/2009 July /31/2009 August /30/2009 September 0

4 4 F.No. V.84/15-24/ADC/Chamunada/0A-I/2013 October /30/2009 November December /31/2010 January February March /04/2010 TOTAL MONTH AMOUNT BASIC EXCISE EDU H EDU TOTAL Cenvat Register RG23A Part-II Entry Date April /31/2010 May /30/2010 June /31/2010 July /31/2010 August September /30/2010 October November December January S511 2/28/2011 February /31/2011 March TOTAL MONTH AMOUNT BASIC EXCISE EDU H EDU TOTAL Cenvat Register RG23A Part-II Entry Date Apr /31/2011 May Jun /31/2011 Jul Aug /31/2012 Sep Oct /30/2011 Nov i477 12/31/2011 Dec /31/2012 Jan /29/2012 Feb /31/2012 Mar /31/2012 TOTAL MONTH AMOUNT BASIC EXCISE EDU H EDU TOTAL Cenvat Register RG23A Part-II Entry Date Apr /31/2012 May Jun /31/2012 Jul /31/2012 Aug /30/2012 Sep /31/2012 Oct /30/2012 Nov /31/2012 Dec /31/2013 Jan /28/2013 Feb Mar TOTAL Grant Total ,92,411

5 5 F.No. V.84/1 5-24/ADC/Chamunada/0A-I/ Further, the information regarding availment of Cenvat credit of Service Tax paid to foreign commission agent was provided by the said assessee vide their letter dtd in reference to letter F.No. AR-II/GTA-FA/ST/ dated and the summons dtd issued by the Superintendent, Central Excise, AR-II, Division-Ill, Ahmedabad-I in which they have provided the year wise/entry wise details of the total cenvat credit taken to the tune of Rs. 19,92,411/- (Rs. 19,34,384/- cenvat duty + 38,688/- Edu. Cess + Rs. 19, 339/- S.H.E. Cess ) as explained above. 4. Hon'ble High Court of Gujrat in case of Commissioner of Central Excise, Ahmedabad-II V/s. M/s. Cadila Health Care Ltd., 2013 TIOL-12-HC-AHM-ST dated & 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(1) 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) (ii) 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 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 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(/)of Cenvat Credit Rules,2004. 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 upto the place of removal alone would appears to be eligible. After the final products are cleared upto the place of removal, there will be no scope for subsequent use of service to be treated as input services. Therefore,

6 6 F.No. V.84/15-24/ADC/Chamunada/0A-1/2013 services utilized beyond the stage of manufacturing and clearance of the goods from the factory cannot be treated as input services. Thus, it appears 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 appears to have wrongly availed Cenvat Credit of Service tax paid on Commission paid to commission agent for sale of finished goods into foreign country cleared to their customers contrary to the provisions of Rule 3 of Cenvat Credit Rules, 2004 read with Rule 2(1) (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 neither used directly nor indirectly, in or in relation to the manufacture of final products. Therefore, the said assessee appears 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 appears 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 have not any relation with the manufacturing activity and also do not appear to be fallen within the ambit of definition of

7 7 F.No. V.84/15-24/ADC/Chamunada/0A-1/2013 input services as defined under Rule 2(1) 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, Further, services of the foreign commission agent also do not appear to be falling 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(1) of the Cenvat Credit Rules, 2004 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 for export sales of final product. 10. A statement of Shri Chirag H. Shah, aged 42 years, Manager (Accounts) (Authorised Person) for the said assessee was recorded on under Section 14 of Central Excise Act, 1944 [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 to , 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 there is no provision prevailing to provide the details of the Services on which Cenvat credit availed, therefore, they have not declared the name of services on which they have availed the service tax credit for the period from to ; that they have not availed any Cenvat Credit on the said service ( i.e. commission paid to the foreign agent) except they have provided the details vide their letter dated 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 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 appears 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(I) of the Cenvat Credit Rules, Thus, it appears 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, Ahmadad-II vs. M/s Cadila Healthcare Limited, supra. Also Rule 2 (I)

8 8 F.No. V.84/15-24/ADC/Chamunada/0A-I/2013 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 has been passed on to the assessee, took Cenvat credit in violation of Cenvat Credit Rules. It appeared that the said assessee had taken the cenvat credit on the services which did not qualify to be included 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 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 the admissibility of the Cenvat credit shall lie upon the manufacturer..." took credit of service tax paid on commission paid to foreign commission agents which did not qualify to be included as "input service" defined under Rule 2(1) of Cenvat Credit Rules, Thus, it appeared that the said assessee had 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 had taken the Cenvat Credit on the said service despite knowing that the same did not qualify as 'input services' (ii) the service had not been used in or in relation to the manufacture of final products and services were related to sales and not sales promotion and as such did 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 services tax paid on commission paid to foreign commission agents. Therefore, the said Cenvat Credit amounting to Rs. 19,92,411/- appeared to have been wrongly taken and utilized for the payment of duties of excise which resulted in revenue loss to the Government during the period to and the same was 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 upto ) 13. 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 appeared to have taken and utilized cenvat credit of service tax paid on commission paid to foreign commission agents during the period to It also appeared that the said assessee had contravened the provisions of Rule 2 of the Cenvat Credit Rules, 2004 read with Rule 3 of the Cenvat Credit Rules, 2004 for credit taken of service tax paid on commission paid to foreign commission agents. The said assessee had taken and utilized an amount of RS. 19,92,411/- during the said period. Out of the total amount of Rs. 19,92,411/-, the said assessee is required to pay the amount of Rs. 9,50,152/- (i.e. Rs. 9,22,477/- Cenvat duty + Rs. 18,449/- Edu. Cess + Rs. 9,226/- S.H.E. Cess) under Rule 14 of Cenvat Credit Rules, 2004 read with provisions of

9 9 F.No. V.84/1 5-24/ADC/Chamunada/0A-I/201 3 erstwhile Section 11A(1) of the Central Excise Act, 1944 being the relevant provision of the law for the period upto The remaining amount of Rs. 10,42,259/- (i.e. Rs. 10,11,907/- Cenvat duty + Rs. 20,239/- Edu. Cess + Rs. 10,113/- S.H.E. Cess) is required to be recovered under Rule 14 of the Cenvat Credit Rules, 2004 read with erstwhile Sections 11A(5) of the Central Excise Act, 1944 being the relevant provision of the law for the period from , Rule 14 of the Cenvat Credit Rules, 2004 read with provision under Sections 11AA of the Central Excise Act, 1944 [erstwhile SectionllAB of the Central Excise Act, 1944 for the relevant period upto ] shall apply mutatis mutandis for effecting recovery of interest. 14. In view of the above, it appeared that the said 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 services which did not qualify as 'input services'; Rule 9(6) of the Cenvat Credit Rules, 2004 in as much as they had failed to discharge the burden of proof regarding admissibility of Cenvat Credit. Further, it appeared that the assessee had suppressed the material facts regarding taking of Cenvat Credit of duty paid on services not covered under the definition of input services by not indicating the same in their monthly/quarterly returns or in any other manner. Therefore, the said 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. upto ) and Rule 15(2) of the Cenvat Credit Rules, 2004 [Applicable during the relevant period.i.e to ] read with Section 11AC of Central Excise Act, 1944 & Rule 15(2) of the Cenvat Credit Rules, 2004 [Applicable during the relevant period.i.e to ] read with Section 11AC (b) of Central Excise Act, 1944 for the above said contraventions. 15. Therefore, M/s Chamunda Pharma Machinery Pvt. Ltd., situated at 7602, Phase-IV, GIDC, Vatva, Ahmedabad were called upon to show cause as to why :- (i) The Cenvat credit wrongly availed by them on Service Tax paid amounting to Rs.9,50,152/- (i.e. Rs /- + Rs.18449/- + Rs.9226/- ) for the period from April-2008 to 7 th April-2011 (Inclusive of Education Cess and Higher Education Cess) should not be disallowed and recovered under Rule 14 of Cenvat Credit Rules 2004 read with erstwhile Section 11A(1) of Central Excise Act, The Cenvat credit wrongly availed by them on Service Tax amounting to Rs.10,42,259/- (i.e. Rs /- + Rs.20239/- + Rs.10113/-) for the period from to March-13 (Inclusive of Education Cess and Higher Education Cess) should not be disallowed and recovered under Rule 14 of Cenvat Credit Rules 2004 read with Section 11A(5) of Central Excise Act, (iii) Interest should not be charged & recovered for wrong availment of Cenvat Credit

10 10 F.No. V.84/15-24/ADC/Chamunada/0A-I/201 3 under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11AA [erstwhile Section 11AB for the relevant period] of Central Excise Act, (iv) Penalty should not be imposed under Rule 15(3) of the Cenvat Credit Rules, 2004 [Applicable during the relevant period i.e. upto )] & Rule 15(2) of the Cenvat Credit Rules, 2004 [Applicable during the relevant period.i.e to ] read with Section 11AC of Central Excise Act, 1944 & & Rule 15(2) of the Cenvat Credit Rules, 2004 [Applicable during the relevant period.i.e to ] read with Section 11AC (b) of Central Excise Act, DEFENCE REPLY 16. The assessee submitted its defence reply dated received on 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. 17. The assessee has submitted that on the merits of the case, the present show cause notice is not sustainable and liable to dropped on the ground of limitation itself. As per assessee, the department had erred in invoking the extended period of limitation despite knowing the facts that there is no fraud, suppression of facts or misstatement or misrepresentation with intent to evade payment of duty. 18. The input services as defined in Rule 2 (I) of the Cenvat Credit Rules mean any service used by the manufacturer, whether directly or indirectly, in or in relation to manufacture of final products and clearance of final products up to the place of removal. Commission agents bring sales order and unless the agents get sales order, the entire manufacturing operations cannot be conducted as the machineries are of kinds that are 'made to order'. The finished goods are required to be manufactured as per the requirements and specifications of the customers. For bringing orders, the commission agents charge fixed commission on lump sum basis and therefore, the commission agent's activity is directly related with the manufacture of final product. 19. In various order, the Hon'ble Tribunal has consistently taken a view that cenvat is available on commission agent's services. 20. They further submitted in their defence reply that they have filed various ER-1 returns with the department regularly and they have maintained RG-23A Part-II register in which they have mentioned that the availment of credit is for "service tax paid on foreign sales commission". Further, in the statement also, their manager has specifically stated that there is no column in ER-1 where one can mention the details of cenvat and they had a bona fide belief regarding admissibility of credit on the aforesaid services on the basis of

11 11 F.No. V.84/15-24/ADUChamunada/0A-1/2013 various rules and circulars. PERSONAL HEARING: 21. The personal hearing in the matter was held on , wherein Shri Nirav P. Shah, Advocate appeared on behalf of the assessee and reiterated the stand taken by them in their written submission dtd and requested to decide the case on its basis. DISCUSSIONS AND FINDINGS: 22. 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. 23. 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. 19,92,411/- during the financial year from April, 2008 to 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(1) 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 commission agent for sale of their finished goods. 24. 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

12 12 F.No. V.84/15-24/ADC/ChamunadaJOA-I/20r3 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 1TR 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 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(1) 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

13 13 F.No. V.84/15-24/ADC/Chamunadal0A-I/2013 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 sales agents. 25. I further find that the assessee has argued that there is no suppression of the facts or contravention of any provisions of the act or rules made there under with intent to evade payment of duty on their part and hence there is no justification to invoke extended period in this case. They have argued that since they have declared relevant details in their ER-1, there was no suppression on their part and they have maintained RG-23A Part-II register in which they have mentioned that the availment of credit is for "service tax paid on foreign sales commission". Further, in the statement also, their manager has specifically stated that there is no column in ER-1 where one can mention the details of cenvat and they had a bona fide belief regarding admissibility of credit on the aforesaid services on the basis of various rules and circulars.

14 14 F.No. V.84/15-24/ADC/Chamunada/0A-I/ 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 on 20/06/2013, the demand can be restricted only for the period from June, '12 till March, 2013 instead of period from May, 2008 to March, 2013, as proposed in the show cause notice. 27. The assessee has not offered any arguments against the proposal of recovering interest under the provision of Rule 14 of CCR, 2004 read with Section 11AB or 11AA, as the case may be, of Central Excise Act, However, I find that provisions of Rule 14 of the CCR, 2004 (as applicable during the period in question) clearly provide 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 mutatis mutandis for effecting such recoveries. Thus, the wrongly availed Cenvat credit is required to be recovered from said assessee along with interest in terms of provisions of Rule 14 of CCR, read with Section 11A and Section 11AA ibid. 28. The assessee relying on the judicial pronouncements argued that in view of the legal positions and judicial interpretation thereof in various judgments, they have rightly availed the Cenvat credit of service tax paid on sales commission and acted under bonafide belief. In this case they had not committed contravention of any of the rules with intent to evade payment of duty. Therefore, no penalty could be justifiably imposed on them in law and therefore, no penalty can be imposed on them (a) under erstwhile Rule 15(3) of Cenvat Credit Rules, 2004 for the period up to , (b) under Rule 15 (2) of CCR, 2004 read with Section 11AC of Central Excise Act, 1944 from to and (c) under Rule 15 (2) of CCR, 2004 read with Section 11 AC (b) ibid for the period to As regards proposal for imposition of penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11 AC of the Central Excise Act, I find that once the charges of suppression of facts do not prove, the penal provisions under said Rule 15(2) read with Section 11AC ibid cannot be invoked in this case. However, the said assessee has contravened the provisions of CCR, 2004 as discussed above and thereby

15 1 ) 1'.1N o. V.84/15-24/ADC/Chamunada/OA-I/2013 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 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. I further tend to rely on the decision of Hon'ble Tribunal in case of CCE, Salem Vs Sri Krishna Smelters Ltd ( 2013 (295) ELT 714 ( Tri Chennai). wherein it was held that " 5. Secondly, for such a wrong utilization of credit the penalty provisions under Rule 15(2) of CCR, 2004 cannot be invoked unless a case of suppression, fraud etc. is established. A mere wrong utilization of credit cannot attract provisions of Rule 15(2). Such a case, however, comes under the provisions of Rule 15(1) which deals with wrong utilization of the credit in other cases i.e. cases other than those involving suppression, fraud etc." I also rely upon the decision of Hon'ble Tribunal in case of CCE, Trichy Vs M.M. Forgings Ltd. ( 2013 (294) ELT 145 ( Tri Chennai), wherein it has been held that " The case record do not show any case of suppression, fraud etc. involved in taking the excess credit. Hence, the imposition of penalty under Rule 15(2) is not warranted in this case. However, the respondents are liable to penalty under Rule 15(1) in view of the fact that the provisions of Rule 15(1) are similar to wordings of Rule 14 which has been interpreted by the Hon'ble S.C. in the case of Ind-Swift Laboratories (supra) to mean that taking ineligible credit even if the same is not utilized brings as assessee under the provisions of Rule 15(1)." 29. Thus, in light of the above, I hold that the CENVAT credit totally amounting to Rs. 5,45,699/- was wrongly availed by the assessee on the above mentioned Service during the period from June, 2012 to March, 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 11 A of the Central Excise Act, Further interest is also required to be charged on the 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. 30 In view of my above findings, I pass the following order in the matter: ORDER (i) I disallow the CENVAT Credit amounting to Rs. 5,45,699/- ( Rupees Five Lakhs Forty-Five Thousand Six Hundred Ninety Nine only) for the period from June, 2012 to March, 2013 and order to be recovered from M/s Chamunda Pharma Machinery Pvt. Ltd., Plot No. 7602, Phase-IV, GIDC, Vatva, Ahmedabad in terms of the provisions of Rule 14 of CENVAT Credit Rules, 2004 read with Section 11A of Central Excise Act, 1944.

16 16 F.No. V.84/15-24/ADC/Chamunada/0A-I/20I3 (ii) I drop the demand of remaining amount of Rs. 13,96,712/- for the period from April, '08 to May, '2012 as per findings in para 26 above. (iii) I order to recover interest at the prescribed rates from M/s. Chamunda Pharma Machinery 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, (i) I impose penalty of Rs. 1,50,000/- (Rupees One Lakh Fifty Thousand only) upon M/s. Chamunda Pharma Machinery Pvt. Ltd., Ahmedabad under the provision of Rule 15(1) of the CENVAT Rules, The Show cause Notice issued to M/s. Chamunda Pharma Machinery Pvt. Ltd., Ahmedabad vide F.No. V.84/15-24/ADC/Chamunda/0A - 1/2013 dated 20/06/2013 stands disposed of in above manner. / 7) 77 <- 1 /1 (Sameer Chitkara ) Additional Commissioner, Central Excise, Ahmedabad-I. F. No.:- V.84/15-24/ADC/Chamunda/0A -1/2013 Date: 04/02/2014. By Registered Post A.D. To, M/s Chamunda Pharma Machinery Pvt. Ltd., Plot no. 7602, Phase-IV, GIDC, Vatva, Ahmedabad. Copy to: 1. The Commissioner C.Ex., Ahmedabad-1 2. The Deputy Commissioner, Central Excise, Division-Ill, Ahmedabad-I. 3. The Superintendent, Central Excise, AR-II, Division-Ill, Ahmedabad-I. 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.