The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Bangalore has held that the sales promotion, being a post-manufacturing activity, is not eligible for CENVAT credit.
The Department contended that the activities undertaken by M/s L&T for the appellants are post-production and post-removal activity and as such has no nexus with the manufacturing activity; the Rule itself defines Input Service rendered in or in relation to the manufacture of final products up to the place of removal.
The assessee contended that the Explanation to Rule 2(l) of the CENVAT Credit Rules inserted vide Notification No. 2/2016-CE (NT) dated 03.02.2016 is clarificatory and applicable retrospectively and therefore Sales Promotion is to be understood by way of sale of dutiable goods on a commission basis.
The Tribunal comprising S.K.Mohanty, Judicial Member, and Mr. P. Anjani Kumar, Technical Member has held that the Commissioner has correctly held that the impugned service does not qualify as Input Service as the same was not used in or in relation to the manufacture of goods by the appellants and therefore, the credit availed is illegal.
Concluding the issue in favor of the department, the Tribunal held that in the case of Cadila Healthcare Ltd., the High Court of Gujarat has gone into all the legal issues involved and has come to a categorical conclusion as cited above. It is pertinent to note that High Court has also referred to the judgment of the Punjab & Haryana High Court in the case of Ambika Overseas and has clearly held that they are not inclined to accept the contention. We are of the considered opinion that the High Court of Gujarat in the case of Cadila Healthcare has discussed the issue at length. Compare to this judgment, the judgment in Ambika Overseas did not consider all the relevant issues. Moreover, it is much more pertinent to note that the High Court of Gujarat has given similar findings in the case of GSFC. For these reasons, we are of the considered opinion that the judgment in Cadila Healthcare Ltd. holds good, more so, being the latest.”
Refusing the plea to refer the final decision to a larger bench, the Tribunal held that “we are not inclined to accept the reliance of the appellants on the judgments of the Tribunal in Essar Steel Ltd. and Federal Moghul. We find that the appellants are not eligible to avail of CENVAT credit on the Sales Commission paid to M/s L&T Ltd. We find that the appellants have also submitted that in case the bench takes a contrary view to the judgments of the tribunal in Essar India Ltd and Federal-Mogul, they may refer the issue to a larger Bench. We find that in view of the elaborate discussion and categorical finding of the Gujarat High Court in the case of Cadila (supra) and in view of our discussion as above, no such reference to the larger bench is warranted.”
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