Whether Sales commission is eligible input service for availment of CENVAT Credit? Held, No. In case of contradictory decisions of the two High Courts, whether it is mandatory to refer the matter to Larger Bench? Held, No.
Facts:
The appellant availed of CENVAT Credit on commission services procured during the period July, 2008 to April, 2009. The Adjudicating Authority and Tribunal relying on the decision of the jurisdictional High Court in the case of CCE, Ahmedabad-II vs. Cadila Healthcare Limited 2013(4) STR 3 (Guj.) and disallowed CENVAT Credit on sales commission. Being aggrieved, the appellants filed appeal before the Hon’ble High Court with following substantial questions of law:
• Whether the Tribunal was justified in passing the order without considering contrary decisions of the Punjab & Haryana High Court and the Gujarat High Court on the same subject and also that the department had not filed appeal against the Punjab & Haryana High Court’s decision?
• Whether the Tribunal was justified in relying only on the Gujarat High Court’s decision since service tax is a central levy and such discrimination would violate Article 14 and 19(1)(g) of the Constitution of India?
• Whether there was injustice on the part of the Tribunal and the order was illegal and absurd?
• Whether sales commission was not in the nature of sales promotion, an activity specifically covered in inclusive part of definition of input services for availment of CENVAT Credit?
The appellants contended that they were entitled to CENVAT Credit on sales commission in view of CBEC Circular dated 29th April, 2011 which is binding on the department. The appellants relied on various decisions in support of their contention. The appellants argued that in view of the favourable decision of the Punjab & Haryana High Court in the case of Ambika Overseas 2012 (25) STR 348 (P & H), the appellants was entitled to CENVAT Credit and since there were contrary decisions of the two High Courts, the appellants requested to refer the matter to the Larger Bench.
Held:
If there is conflict between the jurisdictional High Court’s decision and CBEC Circular, decision of the jurisdictional High Court is binding on the department.
Decision of the jurisdictional High Court in case of Cadila Healthcare Limited (supra) has been challenged before the Hon’ble Supreme Court and the said order is not stayed by the Hon’ble Supreme Court.
Decision of the jurisdictional High Court is binding on the department rather than decision of the other Courts even in case there are contradictory decisions prevailing on the subject matter.
Since decision of Cadila Healthcare Limited (supra) is pending before the Hon’ble Supreme Court, the matter cannot be referred to the Larger Bench. Even otherwise, the High Court did not see any reason to take a contrary view than as given in Cadila Healthcare Limited (supra).
Just because there were contrary decisions, matter cannot be referred to the Larger Bench when the High Court was in agreement with the view taken by the jurisdictional High Court.
Accordingly, the Hon’ble High Court held that the Tribunal was right in relying on the decision of Cadila Healthcare Limited (supra) CENVAT Credit of sales commission services.
