2023-VIL-1165-CESTAT-CHE-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Rule 2(m) and Rule 7 of Cenvat Credit Rules, 2004 - Distribution of credit by Corporate Office as ISD - Revenue objection that part of credit distributed is attributable to trading activity – appellant case that the eligibility of credit distributed by the ISD cannot be questioned at the recipient's (appellant) end – whether Show cause notices issued to the appellant-manufacturing unit is without jurisdiction – HELD – in terms of Rule 14 of CCR, 2004 wrongly availed credit is to be recovered from the manufacturer/ service provider. Rule 14 uses the words ‘taken and utilised wrongly’. Later, in 2008, the word ‘and’ was substituted with ‘or’ - whether be it ‘and’ or ‘or’ the demand can be made against the appellant-manufacturer who has utilised the credit for payment of duty. In the present case, the Bangalore unit is not able to utilise the accumulated credit. It is only the manufacturing unit that can utilise the credit for payment of duty. For this reason, the Show Cause Notice issued to the appellant-Puducherry unit is well within the jurisdiction – further, usually the invoices are raised in favour of Head office by the service provider even though the services may be consumed in other units. The ISD unit therefore avails the credit on behalf of the other units and then distributes it as per provisions of law - the appellant-manufacturing unit who has received the credit distributed by the ISD unit cannot be said to be a recipient unit in literal sense so as to oust the jurisdiction of the formations at Puducherry. From the foregoing, the issue on jurisdiction is answered in favour of Revenue and against assessee – however, denial of Cenvat Credit for different periods and the demand raised thereon cannot sustain. The issue on merits is answered in favour of assessee and against the Revenue – the appeals are allowed - Cenvat Credit on input services - Nexus with the manufacturing activity - Eligibility of credit on Housekeeping services and Warranty/AMC services – HELD - The credit availed on various input services prior to 01.04.2011 have been denied alleging that there is no nexus for input services with the manufacturing activity - Prior to 01.04.2011 all these services the definition of input services had a wide ambit as it contained the words ‘activities relating to business’. So for the period prior to 01.04.2011 are availed for activities relating to the credit availed is eligible as these services are business of the manufacturer - For the period after 01.04.2011 it can be seen that in the appellant’s own case the credit availed on all services, except Housekeeping services and AMC/warranty services have been allowed. The department having allowed the credit for certain period cannot deny credit for other subsequent/different periods - Denial of credit on the ground that the credit is availed on exempted services (trading) – HELD - The Department has not been able to counter calculations and figures explained by the appellant. In case, the appellant avails credit in respect of common input services relating to trading they have to reverse the proportion attributable to trading - In the present case, the trading activity takes place mainly at Head office at Bangalore. The credit availed in respect of trading at Bangalore unit is only Rs.9,49,60,261/- on the total turnover. There is a huge balance of unavailed credit or undistributed credit lying in stock with the Bangalore unit. This being so, it cannot be alleged that the credit in respect of trading has been distributed - Department has not been able to explain as to how Rs.1,73,60558/- pertains to trading when the credit has been distributed to the appellant unit - It is settled law that it is not required that there should be one to one correlation for availment of credit or utilisation. The same would apply for distribution of credit by ISD also. This being so, the explanation put forward by appellant with their consistent plea is tenable and acceptable - denial of Cenvat Credit for different periods and the demand raised thereon cannot sustain. The issue on merits is answered in favour of assessee and against the Revenue
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