• Tue. Nov 29th, 2022

Cenvat credit allowed to pharmaceutical companies on service tax paid to commission agents for sales promotion: Calcutta HC

ByChad J. Johnson

Sep 28, 2022

In a recent ruling on Tuesday, a divisional bench of the Calcutta High Court ruled that cenvat credit is given to pharmaceutical companies on service tax paid to agents on commission for sales promotion.

The respondent, M/S. Himadri Specialty Chemical Limited is engaged in the manufacture of coal pitch, naphthalene, HC oil carbon black and similar preparations. An audit was conducted of the Respondent for the period April 2014 to March 2015 and the Appellant noticed that the Respondent used and utilized the input tax credit for commission paid to various service providers who act as commission agents.

The department observed that the respondent had entered into an agreement with the sales agents of their wares who issued invoices simply as a commission on sales and that this was mentioned in the invoices under the heading “Description”. Thus, the Department was of the prima facie opinion that the role of the commissionaire cannot be treated as an input service and that the respondent cannot take advantage of a credit. It was further alleged that the respondent deliberately withheld material facts from the department to evade payment of tax.

Justice TS Sivagnanam and Justice Supratim Bhattacharya relied on the decision in CCE, Ahmedabad-II Versus Cadila Healthcare case and observed that “decisions of another High Court in any case will not bind another High Court and these decisions were found to be of persuasive value.In any event, on the facts of the Cadila Health Care Limited case, the Court found no evidence on record to suggest that officers at the commission were involved in sales promotion activities.Therefore, the decision in the case of Prabhat Pan does not provide any income support.In addition, it is seen that the commission paid by the respondent to the commission stockist is included in the taxable value of the goods on which the excise duty was paid by the respondent on the final products, namely the carbon black In fact, this was noted by the contracting authority.

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CHIEF COMMISSIONER OF CENTRAL EXCISE, Vsa HIMADRI SPECIALTY CHEMICAL LIMITED

File number: CEXA NO. 04 OF 2022

Date of judgment: 27.09.2022

CITATION: 2022 TAXSCAN (HC) 710