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2026 Supreme(Online)(CESTAT) 1983
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
Ashok Jindal, Judicial Member, K. Anpazhakan, Technical Member
Phillips Carbon Black Limited – Appellant
Versus
Commissioner of Central Goods & Service Tax – Respondent
Excise Appeal No. 77153 of 2018 | Excise Appeal No. 77591 of 2018
For the Appellants/Petitioners: Rahul Tangri, Payel Bharwani
For the Respondents: P. Das
The amendment to Rule 2(l) of the Cenvat Credit Rules, 2004, clarifying that sales commission is an 'input service' under 'sales promotion', is retrospective in nature, entitling manufacturers to Cenvat credit on such services.
Headnote:(A) Cenvat Credit Rules, 2004 - Rule 2(l) - Sales Promotion - Cenvat credit on commission services - Whether sales commission is an eligible input service - The amendment explicitly including services by way of sale of dutiable goods on commission basis under 'sales promotion' is clarificatory and retrospective in nature. (Paras 7.1, 7.2)
(B) Limitation - Extended period of limitation - Invocation of - Where the credit was availed under a bona fide belief, extended period of limitation cannot be invoked. (Para 7.5)
(C) Penalty - Rule 26 of Central Excise Rules, 2002 - Personal penalty - Where the underlying credit is found to be regular and eligible, no personal penalty can be imposed on the employee. (Para 8)
Facts of the case:
The appellant was denied Cenvat credit on service tax paid for commission agents, on the ground that such activities are post-removal and not covered under Rule 2(l) of Cenvat Credit Rules, 2004. Penalty was also imposed on the Deputy Manager (Accounts). The appellant contested that sales commission is an integral part of sales promotion and is eligible for credit.
Findings of Court:
The tribunal held that the Explanation to Rule 2(l) clarifies that sales commission is part of sales promotion and hence input service, applicable retrospectively. Consequently, the denial of credit was set aside, as was the personal penalty.
Issues: Whether Cenvat credit is admissible on sales commission services, whether the amendment is retrospective, and whether penalty on the individual is justified.
Ratio Decidendi: The amendment clarifying 'sales promotion' is retrospective in nature, being clarificatory, thus permitting credit on sales commission services; accordingly, no suppression exists to warrant penalties or extended limitation periods.
Result: Appeals allowed.
| Table of Content |
|---|
| 1. overview of the dispute regarding eligibility of cenvat credit for sales commission. (Para 1 , 2) |
| 2. arguments for the retrospective application of cenvat credit rules. (Para 3 , 4) |
| 3. tribunal ruling that sales commission is eligible for credit due to retrospective clarificatory amendments. (Para 6 , 7 , 8 , 9) |
Order: [PER SHRI K. ANPAZHAKAN]
The present appeals have been filed against the impugned Order-in-Original No. 38/Commr/Bol/2017-18 dated 20.02.2018 passed by the Commissioner of Central Goods & Service Tax Commissionerate Bolpur Nanoor Chandidas Road, Sian, Bolpur, Dist –Birbhum-7312047.
2. M/s. Phillips Carbon Black Ltd. (herein after referred as the Appellant) are engaged in the manufacture of carbon black of various grades at its manufacturing facility at Durgapur. In accordance with the principle of value addition, the Appellant availed Cenvat Credit of various inputs, capital goods and input services and utilized the same for payment of excise duty. Such input services on which the Appellant availed Cenvat Credit interalia included the services procured from Commission Agents like Suntec Enterprises and Bajaj Rubber Co. Pvt. Ltd. The said services were rendered for promoting, canvassing orders, effecting sales for and on behalf of the Appellant. The service providers were rendering the services of procuring and forwarding information reports, conducting market research and survey in accordance with the instructions of the Appellant. For the services rendered, Commission was paid based on the percentage of actual sales effected by such agents.
2.1. The officers of the department was of the view that the activities carried out by commission agents, being post removal activity, do not fall within the ambit of Rule 2(l) of the Cenvat Credit Rules, 2004. Accordingly, a Show Cause Notice 43/COMMR/CE/DGP/16-17 dated 23.03.2017 was issued to the appellant proposing to deny Cenvat Credit of Rs. 3,34,04,404/- availed by the Appellant for the period from April 2012 to June 2016 based on the allegation that the activities carried out by the commission agents, being post removal activity, do not fall within the ambit of Rule 2(l) of the Cenvat Credit Rules, 2004. The Notice also proposed personal penalty on Shri. Santosh Kumbhakar, Deputy Manager, Accounts under Rule 26 of Central Excise Rules, 2002, on the allegation that of being well aware of the facts of availment of inadmissible credit and being involved in execution mechanism, and for not reversing the same.
2.2. On adjudication, the Ld. Adjudicating authority has dropped the demand of Cenvat Credit of Rs. 19,58,012/-, in respect of the credit availed from 3rd February 2016 to June 2016 based on the amendment dated 03.02.2016 and confirmed the disallowance of the remaining Cenvat Credit of Rs. 3,14,46,392/-availed on sales commission services during the underlying period. Personal Penalty has also been imposed on Shri. Santosh Kumbhakar, Deputy Manager, Accounts under Rule 26 of Central Excise Rules, 2002.
2.3. Aggrieved against the disallowance of Cenvat credit along with interest and penalty and imposition of personal penalty on Shri. Santosh Kumbhakar, Deputy Manager, Accounts, both the appellants have filed these appeals.
3. The appellant submits that the instant proceedings were initiated against them based on the allegation that the expenses incurred by the Appellant were in the form of sales commission for which Cenvat credit under Rule 2(l) of the Credit Rules is not eligible. In this regard, the appellant submits that the issue is no longer res integra since Cenvat Credit Rules have been amended to include ‘Sales Commission’ as ‘input service’. It has also clarified that sales commission has been included in sales promotion under Rule 2(l) of the Credit Rules. The explanation has been inserted as a clarification, and as a result of which, sale of goods on commission basis also stands covered under the expression ‘sales promotion’. Thus, the appe
