2023 (3) TMI 634 - AT - Central Excise

Denial of CENVAT Credit - Input Service distribution - input services has been distributed only to Parryware situated at Ranipet, though there were other three manufacturing units at Perundurai in Tamilnadu, Alwar in Rajasthan and Dewas in Madhya Pradesh - non-maintenance of separate records - common input services proportionate to trading activity - HELD THAT:- One of the contentions raised by the Department is that the input service credit availed under the category of business auxiliary services which is accounted in nature of reimbursement of freight charges, manager salary, etc., is not eligible for credit. The category of service is not disputed. During the relevant period the definition of input services had a wide ambit as it included the words ‘activity relating to business’. For this reason the view taken by the Commissioner (Appeals) that the credit on the impugned services is eligible is legal and proper.

Credit has been distributed only to single unit by the Head Office - HELD THAT:- Even if the services are availed at the Head Office the same is available for credit since it is not necessary that the input services should be consumed in the factory itself. Another ground raised by the Department is that the credit has been distributed to one unit only. Prior to the amendment in 2012, Rule 7 did not provide any manner of distribution of input service credit. An assessee had an option to decide the distribution of the credit.

Reversal of Credit relating to Trading Activity - HELD THAT:- The Commissioner (Appeals) has directed to reverse the credit which is attributable to trading activity. Though Rule 6 (3A) was introduced with effect from 01.04.2008, the Commissioner (Appeals) has correctly noted that the respondent is not eligible for the credit availed on common input services used for trading activity. Prior to 01.04.2008 the law did not provide a method for calculation of reversing the credit attributable to trading activity - when the formula has been put in effect as per the Rule 6(3A) from 01.04.2008, adoption of the said formula to resolve situation where the credit has been availed on trading activity does not require interference. The Commissioner (Appeals) has given direction to the respondents to furnish before the Department work sheets of the proportionate credit relating to trading activity within a period of one month from the date of order. It is also directed to furnish Chartered Accountant Certificate to support the veracity of the figures.

Department appeal is dismissed.