TMI Blog2014 (10) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... outside the manufacturing unit and which cannot be said to be the service used in a manufacturing unit. - stay granted. Recovery of credit from ISD - Held that:- When much amount of service tax Cenvat credit has been distributed by the corporate office among its manufacturing units and since separate proceedings have been initiated against the manufacturing units for recovery of the credit, there is no justification for recovering the credit amount from the Input Service Distributor. Moreover, the corporate office of the appellant company as Input Service Distributor is neither a manufacturer nor an output service provider and, hence, the provisions of Rule 14 would not be applicable. In fact when the head office or corporate office of a company, is registered as Input Service Distributor (ISD) and it is alleged that credit has been wrongly taken and passed on by the ISD, the proceedings are initiated against the manufacturing units/output service providers which have taken the Cenvat credit on the basis of ISD invoices issued by the head office/corporate office as ISD. Therefore, in this case initiation of the proceedings for recovery of Cenvat credit alleged to have been wrong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice, Sahibabad Unit, Alwar Unit and Pithampura Unit have taken Cenvat credit. The dispute, as mentioned above, in this case is in respect of the Cenvat credit taken and distributed in respect of advertisement and sales promotion services. Though the unit of the appellant company at Baddi is availing full duty exemption in respect of its products and there are other units also of the appellant company located in different parts of India which are also exclusively engaged in manufacture of exempted final products, the corporate office of the appellant company took Cenvat credit of the entire service tax paid on the advertisement and sales promotion and publicity services received and distributed the same to its manufacturing units including Sahibabad Unit, Alwar Unit, and Pithampura Unit engaged in the manufacture of dutiable final products. The departments objection is that to the extent the appellant company was manufacturing and clearing fully exempted final products, it was not entitled to avail the service tax Cenvat credit in respect of sales promotion, advertisement and publicity services and on this basis it has been alleged that excess credit to the extent of ₹ 28,49, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 11AB and beside this, has imposed penalty of ₹ 1,85,96,962/- on the appellant unit under Rule 15 (2) of Cenvat Credit Rules, 2004 readwith Section 11AC of Central Excise Act, 1944 and also penalty of ₹ 2,000/- on the appellant unit under Rule 15 (3) of Cenvat Credit Rules, 2004. In this order, the Commissioner beside imposing the above penalties on the appellant unit at Alwar has also imposed penalty of ₹ 1,00,00,000/- on the appellant company as Input Service Distributor under Rule 26 (2) of Central Excise Rules, 2002. Against this order of the Commissioner appeal No. E/57608/2013 alongwith stay application No. E/S/58187/2013 have been filed. 1.5 The Commissioner, Central Excise, Indore vide order-in-original No. 9/COMMR/IND/CEX/2013 dated 25/03/13 has confirmed the Cenvat credit demand of ₹ 9,68,31,270/- against the appellant unit at Pithampura alongwith interest thereon under Section 11AB and beside this has imposed penalty of ₹ 9,68,91,270/- on the appellant unit under Rule 15 (2) of Cenvat Credit Rules, 2004 readwith Section 11AC of Central Excise Act, 1944. Against this order of the Commissioner the appeal No. E/58179/2013 alongwith stay ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uantity of inputs used in or in relation to manufacture of exempted goods or for provision of exempted services or input services used in or in relation to manufacture of exempted goods, that while the sales promotion, and advertisement and publicity services are covered by the inclusive portion of the definition of input service , as given in Rule 2 (l) of Cenvat Credit Rules, 2004, this service cannot be treated as having been used in or in relation to manufacture of final products and hence the provisions of Rule 6 (1) are not applicable, that the period of dispute in this case is from April 2006 to March 2011 and during this period as per the provisions of Rule 7 of the Cenvat Credit Rules, 2004, the distribution of service tax Cenvat credit by an Input Service Distributor among its manufacturing units/providers of output service was subject to only three conditions mentioned in Clause (a), (b) (c) of this rule, that all these conditions are satisfied in as much as the credit distributed by the corporate office does not exceed the credit taken in its accounts on the basis of the invoices for the input services, in question, that the credit of service tax attributable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he circumstances of the case, there was no wilful misstatement or suppression of fact on the part of the appellant units, that in the impugned order, the longer limitation period has been invoked alleging that the corporate office at Kaushambi (ISD) has colluded with its manufacturing units at Sahibabad, Alwar and Pithampura, that this allegation is absurd as there cannot be any collusion between head office and its manufacturing unit, that in view of these circumstances, in any case, the Cenvat credit demand only for normal limitation period of one year from the relevant date can be confirmed, that while Sahibabad unit has paid ₹ 1,00,00,000/-, Alwar unit and Pithampura unit have paid the amount of ₹ 55,70,602/- and ₹ 2,42,67,970/- respectively which represents the duty demands within normal limitation period, that in the circumstances of this case, no penalty under Rule 15 (2) readwith Section 11AC of Central Excise Act, 1944 would be imposable and that in view of this, so far as the Sahibabad unit, Alwar unit and Pithampura unit are concerned, the amount already paid by them is sufficient for hearing of their appeals and so far as the corporate office at Kausha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice Distributor and, hence, longer limitation period under proviso to Section 11 A (1) has been correctly invoked and penalty under Rule 15 (2) of Cenvat Credit Rules, 2004 and readwith Section 11AC of the Central Excise Act, 1944 has been correctly imposed. He, therefore, pleaded that this is not the case for waiver and the amount already deposited by the Sahibabad unit, Alwar unit and Pithampura unit is not sufficient to safeguard the interests of the Revenue. 5. We have considered the submissions from both the sides and perused the records. 6. So far as the Cenvat credit demand of ₹ 28,49,22,977/- alongwith interest thereon under Section 11AB against the corporate office of the appellant company (Input Service Distributor) is concerned, we are of the view that when this much amount of service tax Cenvat credit has been distributed by the corporate office among its manufacturing units and since separate proceedings have been initiated against the manufacturing units for recovery of the credit, there is no justification for recovering the credit amount from the Input Service Distributor. Moreover, the corporate office of the appellant company as Input Service Distrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the document referred to in Rule 9 does not exceed the amount of service tax paid; (b) the credit of service tax attributable to a service used in a unit exclusively engaged in manufacture of exempted goods or providing exempted services shall not be distributed ; (c) the credit of service tax attributable to service used wholly in a unit shall be distributed only to that unit. 8. In this case there is no allegation that condition (a) (b) and (c) have been violated. As regards condition (b), we find substance in the contention of the appellant that this condition is applicable in respect of service which is used in a unit exclusively engaged in manufacture of exempted final product or providing of exempted services and this provision would not be applicable to services like advertisement or publicity services which are used outside the manufacturing unit and which cannot be said to be the service used in a manufacturing unit. The condition (d) that the credit of service attributable to service used in more than one unit shall be distributed prorata on the basis of turnover, was introduced only w.e.f. 01/07/12 and the same cannot be given retrospective effect. Hon ble Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X
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