In a recent ruling delivered on Tuesday, a division bench of the Calcutta High Court has held that the cenvat credit is allowable to pharma companies on the service tax paid to the commission agents for the sales promotion.
The respondent, M/S. Himadri Speciality Chemical Limited is engaged in the manufacture of coal pitch, Naphthalene, HC Oil Carbon Black, and similar preparations. An audit was conducted on the respondent for the period from April 2014 to March 2015 and the appellant noticed that the respondent has availed and utilized input credit of service tax against the commission paid to various service providers who are acting as commission agents.
The department observed that the respondent had entered into an agreement with those agents for selling their goods who had raised bills merely for commission for sales and it was so mentioned in the bills under the head “Description”. Thus, the Department was of the prima facie view that the role of the commission agent cannot be treated as input service and credit cannot be availed by the respondent. It was further alleged that the respondent deliberately suppressed material facts from the Department to evade payment of tax.
Justice T.S. Sivagnanam and Justice Supratim Bhattacharya relied on the decision in CCE, Ahmedabad-II Versus Cadila Healthcare and observed that “the decisions of one other High Court in all cases will not bind another High Court and such decisions were held to be of persuasive value. In any event on facts in Cadila Health Care Limited, the Court found no material on record to indicate that commission agents were involved in the activities of sales promotion. Therefore, the decision in the case of Prabhat Pan does not render any assistance to the revenue. Further it is seen that the commission paid by the respondent to the commission stockist is included in the assessable value of the goods on which excise duty has been paid by the respondent on the final products namely carbon black. In fact, this has been noted by the adjudicating authority.”
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