(Prayer: Civil Miscellaneous Appeal filed under Section 35 of Central Excise Act, 1994 against the Final Order Nos.41276 & 41277 of 2017 dated 24.7.2017 passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai.)
Dr. Vineet Kothari, J.
1. The Revenue has filed these Appeals against the order of the Tribunal dated 24.7.2017 allowing the Assessee's Appeals and holding that the Assessee was entitled to Cenvat Credit in respect of the Service Tax paid on the Commission paid to foreign agents, who procured customers and orders and advised the Assessee, a 100% EOU to manufacture and export those garments the foreign country.
2. The Adjudicating Authority initially disallowed the Cenvat Credit holding that such commission paid to foreign agents did not fall within the ambit and scope of Input Services under Rule 2(l) of the Cenvat Credit Rules, 2004 and therefore, the Assessee was not entitled to such Cenvat Credit, but, later, the Tribunal allowed the Appeal of the Assessee and held in favour of the Assessee as under:-
"5. We take note of the arguments put forward by the ld. counsel for the appellant with regard to remand of the matter by the Hon'ble High Court of Madras. Indeed at the time of remand, out of the two judgements relied by the Tribunal in its earlier Final Order dated 13.1.2011, only one judgment pertaining to Cadila Healthcare has been reversed by Gujarat High Court. However, the very same High Court in the case of Nilkamal Crates & Bins (supra) vide judgement reported in 2015 (38) STR J363 (Guj.) has upheld the decision of the Tribunal holding the issue in favour of assessee. The issue in that case was whether assessee is entitled to take credit of the service tax paid under Business Auxiliary Service on commission paid to the commission agent for its activities of sales promotion of the goods exported. The issue being identical, we are of the view that being later judgment the same is applicable to the facts of the present case.
6. In Coca Cola India Pvt. Ltd. Vs. CCE Pune 2009 (242) ELT 168 (Bom.), the Bombay High Court has dealt in detail the definition of "input services" prior to the period 1.4.2011. The Hon'ble High Court has held that said definition has a wide ambit so as to include almost all services. The manufacturer/output service provider can take credit of service tax paid on 'activities related to business'. The commission paid to foreign agent is necessarily an activity related to business of manufacture. The inclusive part of the definition is very wide since it does not exclude any specific category of service related to business. With effect from 1.4.2011 these words 'activities related to business' was deleted from the definition. The period involved in the present case is prior to 1.4.2011. As explained by appellant counsel, the appellants herein being 100% EOU, they manufacture the goods after receiving the orders placed by the foreign purchasers. Foreign Agents help to procure market from abroad for the goods manufactured by the appellant. It is also to be seen that the goods manufactured by the appellant are women inner garments fashion of which the design, need undergo change periodically. The appellants have to manufacture after getting the orders placed specifying the fashion/design/specification. The manufacture of such goods without such specification may not find any market after clearance. The appellant has explained in reply to SCN that being an exporter appellant has to find source of foreign buyers for which they have to engage 'foreign agents' to whom the commission is paid. As a 100% EOU it is required to achieve positive net foreign exchange for which they have to ensure constant foreign market for their products. Therefore, the contention of the department that the activity of sales promotion rendered by the foreign agent is a post-manufacturing service and therefore, not eligible for credit is not tenable. We hold that the denial of credit is unjustified. The impugned orders are set aside. Appeals are allowed with consequential relief, if any, as per law."
3. The Revenue, aggrieved by the said order, is in the Appeal before us. The Appeal was admitted by a co-ordinate Bench of this Court on 25.1.2019 on the following question of law:-
"Whether the Tribunal is correct in holding that the service tax paid by the appellant on the commission paid to foreign agents for marketing of the products will qualify for CENVAT Credit as contemplated in Rule 2(l) of the CENVAT Credit Rules, 2004?"
4. The learned counsel for the Revenue Mr.A.P.Srinivas urged before us that the Assessee, in its reply dated 10.10.2008 to the Show Cause Notice dated 25.9.2008, before the Adjudicating Authority had admitted that as per the Agreement, the foreign service provider was acting as selling agent to sell their product and the commission was paid for the net sales turnover as defined in the Agreement and even though it was contended by the Assessee that such service rendered by the foreign agents would fall within the definition of Input Services under the Cenvat Credit Rules, 2004, the Adjudicating Authority has not accepted the said submission of the Assessee and since the foreign Agents in question acted only as selling agents, the services rendered by them did not amount to Input Services as defined in Cenvat Credit Rules 2004 and therefore, the learned Tribunal erred in holding in favour of the Assessee.
5. On the other hand, the learned counsel, Mr.S.Muthu Venkatraman appearing for the Assessee relied upon the judgment in the case of Commissioner of Central Excise, Ludhiana v. Ambika Overseas (2012 (25) STR 348 (P&H)) of Punjab & Haryana High Court and Bombay High Court's decision in the case of Coca Cola India Pvt. Ltd. v. Commissioner of Central Excise, Pune-III (2009 (242) ELT 168 (Bom.)) and submitted that it is wrong to contend on the part of the Revenue that the foreign agents of the assessee were engaged only for sales purposes and the fact is that the foreign agents had constant presence in the market in such foreign countries and they advised not only the design of the garments to be manufactured and supplies to specific orders, which they procure but they also assisted for the clearance of the goods upon export by the Appellant, which is a 100% EOU and ensured the payments in foreign currency, which the Assessee being 100% EOU was under obligation to earn upon such exports under various applicable laws and therefore, the learned counsel for the Assessee contended that such services rendered by foreign agents within the scope of 'Input Services' as defined in Cenvat Credit Rules 2004 and therefore, the Service Tax paid paid on the commission payments made to such foreign agents should not be denied the benefit of Cenvat Credit as per the Cenvat Credit Rules 2004.
6. Having heard the learned counsel for the parties, we are of the clear opinion that the learned Tribunal has taken a correct view of the matter and has rightly found that the foreign agents of the Assessee in question were rendering the services not only post-sales or post-export by the Assessee but, were engaged in the activities of exploring the market, advising the designs for manufacture and supplies to specific orders procured by them and assisting the clearance of the garments
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in question and export the same to the foreign countries and earn foreign currency in terms of their obligations as 100% EOU and therefore, the service tax paid on commission to foreign agents could not denied the benefit of Cenvat Credit under Cenvat Credit Rules 2004. 7. The case laws relied upon by the learned Tribunal are also apt to be applied and the Tribunal's view is fully supported by the view taken by the Punjab and Haryana High Court as well as Bombay High Court in the aforesaid circumstances. Therefore, being in respectful agreement with the view taken by the other High Courts, we confirm the view of the learned Tribunal and we do not find any merit in the Appeals filed by the Revenue. Consequently, the present Appeals are liable to be dismissed. Accordingly, they are dismissed. No costs.