Century Plyboards manufactures plywood and laminate products and sells a good part of its output through a depot network, with commission agents at each depot booking orders, arranging dispatch and collecting payment from buyers in that region. The company paid service tax on those agents' commissions and claimed CENVAT credit on it, treating the commission as an input service that went into the cost of getting goods to market. The department disallowed the credit, confirmed interest, and slapped on an equal penalty, taking the position that sales commission is a post-removal, post-sale expense with no nexus to manufacturing, and so cannot ride on CENVAT credit at all.
That argument has a respectable pedigree in excise law, since there has long been a line of cases distinguishing commission paid to procure sales, which some benches treat as outside the ambit of input services, from commission paid for other kinds of sales support. Century Plyboards' answer was that the analysis changes once you locate where the sale actually happens. If the depot, not the factory gate, is the point of sale and the place from which goods are removed for the purpose of valuation, then everything the company spends to get the goods sold and moved out of the depot, including the agents' commission, sits on the right side of the input-service line, not the wrong side of it.
The Tribunal agreed. It held that under Section 4(3)(c) of the Central Excise Act, 1944, a depot from which excisable goods are sold after their clearance from the factory is itself a place of removal. Once that is established, services availed up to that point of removal, including the commission paid to the depot's sales agents for procuring orders, arranging dispatch to the buyer and collecting payment, fall within the definition of input service under the CENVAT Credit Rules, 2004. The bench treated the commission here as something closer to sales promotion and facilitation at the point of removal than to a pure post-sale, post-removal cost incurred after the transaction was already complete.
There was a second piece to the dispute. Century Plyboards' head office had centralised the credit and distributed it to its manufacturing units through Input Service Distributor invoices, a mechanism the CENVAT Credit Rules permit precisely so that multi-unit manufacturers do not have to trace every service invoice to a specific factory. The department had questioned whether that distribution route was itself valid for this particular credit. The Tribunal found nothing wrong with it, holding that ISD distribution of the credit was admissible once the underlying service qualified as an input service in the first place.
Century Plyboards had relied on the Gujarat High Court's ruling in the Cadila Healthcare line of cases, which has been a recurring reference point in this area of excise litigation precisely because it grappled early with where to draw the line between commission that earns credit and commission that does not. The Tribunal's reliance on the place-of-removal test, rather than on a blanket rule about commission, fits that existing jurisprudence rather than breaking from it, but it is a useful, fact-specific application for any manufacturer that routes sales through a depot network and pays its depot agents on commission.
The result was that the demand, along with the attached interest and the equal-amount penalty, was set aside in full. For excise and GST litigators still working through legacy CENVAT disputes from the pre-GST period, and for GST-era advisors assessing whether similar input tax credit arguments carry over under the current regime's own place-of-supply rules, the order is a reminder that the place-of-removal or place-of-supply characterisation of a transaction can decide a credit dispute more than any abstract label attached to the expense itself. Calling something sales commission does not resolve the question; where in the supply chain it was incurred does. Manufacturers running similar depot structures should document that chain carefully, since this order shows it is exactly what a tribunal will look for first.