Cenvat Credit Availment in Service Tax and ExciseCenvat Credit is admissible on sales promotion , It Will Have Retrospective Application

Cenvat Credit is admissible on  sales promotion which includes services by way of sale of dutiable goods on commission basis .

The notification no. 02/2016-C.E(N.T) inserts an explanation  in clause (l), after sub-clause (C) of Rule 2 of Cenvat Credit Rules,2004. The Explanation is reproduced herein below :

For the purpose of this clause, sales promotion includes services by way of sale of dutiable goods on commission basis.”

On perusal of the same , it could be understood that it says that sales promotion includes services by way of sale of dutiable goods on commission basis .

In otherwords ,it means that such services were already included in it but now it is categorically clarified by an explanation that sales promotion also includes sales commission .

Whereas, it is pertinent to note that It is well settled in law that explanations which are clarificatory in nature i.e which clarifies an existing situation are always retrospective in nature . Hence, it will be applicable on all the pending cases even lying before HC’s or SC of India .

Further , the purpose of inserting an explanation in rules, acts and /or regulations is to end the anamolies existing in the public and trade . Therefore, its full effect has to be  given by retrospective application.

The entire notification is reproduced herein below :

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)

NOTIFICATION  No. 02/2016-Central Excise (N.T.) New Delhi, the 3^rd February, 2016

G.S.R.—(E).- In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) and section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the CENVAT Credit Rules, 2004, namely : –

1. (1) These rules may be called the CENVAT Credit (Second Amendment) Rules, 2016.

(2) They shall come into force on the date of their publication in the Official Gazette.

2.         In the CENVAT Credit Rules, 2004 (here-in-after referred to as the said rules), in rule 2, in clause (l), after sub-clause (C), the following Explanation shall be inserted, namely:-

“Explanation.-For the purpose of this clause, sales promotion includes services by way of sale of dutiable goods on commission basis.”

3.         In the said rules, in rule 3, in sub-rule (4),  after the sixth proviso, the following proviso shall be inserted, namely: –

“Provided also that the CENVAT credit of any duty specified in sub-rule (1) shall not be utilised for payment of the Swachh Bharat Cess leviable under sub-section (2) of section 119 of the Finance Act, 2015 (20 of 2015):”.

[F. No. 332/18/2015-TRU ]

(K. Kalimuthu)
Under Secretary to the Government of India

Note.- The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide notification No. 23/2004 – Central Excise (N.T.), dated the 10^th  September, 2004 vide number G.S.R. 600(E), dated the 10^th September, 2004 and last amended vide notification No. 01/2016 – Central Excise (N.T.), dated the 1^st February, 2016, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 132(E), dated the 1^st February, 2016.