The Delhi bench of the Customs, Excise and Services Tax Appellate Tribunal ( CESTAT ) has held that sending of samples to buyers is a Promotional Activity which cannot be treated as outward transportation for the purpose of allowing Cenvat credit.
In the instant case, the assessee availed Cenvat credit of service tax paid on courier services, which stand utilised by the appellant for despatch of samples of their final product to their prospective customers. The original adjudicating authority allowed such credit but on appeal by the Revenue, Commissioner (Appeals) reversed the order by observing that such courier services are nothing but outward transportation of the goods and since factory gate is the starting point of such outward transportation, the credit could not be available to the assessee.
The assessee contended before the Tribunal that the definition of input service itself includes the services relating to sales promotion. Sending of samples by courier to procure orders from their prospective buyers is not outward transportation of their final product but is an activity relatable to sales promotion. Such sales promotion being specifically included in the definition of input service, the same would be Cenvatable.
The bench, after hearing the arguments from both the sides, held that “the courier services stand utilized by the appellant for sending the samples to their prospective buyers and for procuring orders from them. Ld. Advocate also explains that they are not charging their buyers for the said samples, though duty is being paid by them on the deemed assessable value. In such a scenario, I agree with the ld. Advocate that sending of samples to their buyers is a promotional activity relatable to the sale of their final product and to increase their business. The same cannot be considered to be outward transportation of their final excisable product. As such, to deny the credit on the said ground is not justifiable.”
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