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Commission paid to distributors for selling goods does not amount to sales promotion. Therefore, CENVA T credit was held inadmissible.
Facts
Adjudicating authority disallowed CENVAT credit on commission charges paid to the distributors/consignment stockist following Hon’ble Gujarat High Court’s decision in Cadila Healthcare Limited 2013 (30) STR 3 (Guj). It was contested that the case was factually different as the agreement was not only for sale of the products but it also included sales promotion activities. Department contested on the ground that the contract did not provide for any monetary consideration for the sales promotion activity and therefore, the entire consideration was held to be for sale of goods based on the value of the goods sold.
Held
After analysing the agreement, the Tribunal observed that sales promotion activity was not required to be carried out by distributors on behalf of the appellant. Even though display photographs, brochures and sales promotion material were provided, no consideration was towards such activity. Relying upon jurisdictional High Court’s decision in Cadila Healthcare Ltd. (supra), it was held that activities undertaken by the distributors of the appellant were purely distribution/ sales and had no element of sales promotion and hence, CENVAT credit was held inadmissible. However, since it was a debatable issue, penalty was set aside.
