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TMI Blog2014 (10) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... iled and distributed by the corporate office at Kaushambi as Input Service Distributor (ISD) and in respect of credit passed on to Sahibabad Unit, Alwar Unit and Pithampura Unit, which had taken Cenvat credit on the basis of the invoices distributing the Cenvat credit issued by the corporate office at Kaushambi, Ghaziabad as Input Service Distributor. The period of dispute in these appeals is from April 2006 to March 2011 and the dispute is in respect of distribution of Cenvat credit in respect of advertisement and sales promotion service availed by the company. 1.2 As mentioned above, the corporate office of the appellant company at Kaushambi is registered as an Input Service Distributor under Service Tax (Registration of Special Category of Persons) Rules, 2005 and accordingly, the corporate office on the basis of the invoices for the services received, issued by the service providers takes the credit in its books of accounts and distributes the same among its various manufacturing units as Input Service Distributor. On the basis of the invoices issued by Corporate Office, Sahibabad Unit, Alwar Unit and Pithampura Unit have taken Cenvat credit. The dispute, as mentioned above, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment this quantum of Cenvat credit could neither be taken by the corporate office as input services distributor nor the same can be distributed among its manufacturing units. Accordingly, Commissioner, Central Excise, Ghaziabad vide order-in-original No. 15/COMMR/GBZ/2012-13 dated 28/02/13 has confirmed Cenvat credit demand of Rs. 2,32,28,113/- against the manufacturing unit at Sahibabad Unit alongwith interest under Section 11AB and beside this, has imposed penalty of Rs. 87,71,551/- on the appellant under Rule 15 (2) of Cenvat Credit Rules, 2004 readwith Section 11AC of Central Excise Act, 1944 and another penalty of Rs. 2,000/- under Rule 15 (3) of Cenvat Credit Rules, 2004. Against this order of the Commissioner, Central Excise, Ghaziabad appeal No. E/58868/2013 has been filed alongwith Stay Application No. E/S/59505/2013. 1.4 The Commissioner, Central Excise, Jaipur I by a common order No. 9-10/2013 (CE) COMMR dated 31/01/2013 has confirmed the demand of Rs. 5,32,18,665/- alongwith interest thereon under Section 11AB and beside this, has imposed penalty of Rs. 1,85,96,962/- on the appellant unit under Rule 15 (2) of Cenvat Credit Rules, 2004 readwith Section 11AC of Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt from the from the corporate office while as ISD had distributed the credit, that in view of this, the Cenvat credit demand of Rs. 28,49,22,977/- against the corporate office (ISD) is without any basis and for the same reason there is no justification for imposition of penalty equal to the 25% of this amount on it under Rule 15 (2) of the Cenvat Credit Rules, 2004, that as regards the Cenvat credit demands of Rs. 2,32,28,113/-, Rs. 5,32,18,665/- and Rs. 9,68,91,270/- from Sahibabad unit, Alwar unit and Pithampura unit of the appellant company alongwith interest thereon under Section 11AB, this Cenvat credit had been taken by the corporate office and distributed in respect of advertisement and sales promotion services, that the above quantum of Cenvat credit is sought to be denied to the appellant companys units at Sahibabad, Alwar and Pithampura by invoking Rules 6 (1) of the Cenvat Credit Rules, 2004 according to which Cenvat credit shall not be allowed on such quantity 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of Rule 7 of the Cenvat Credit Rules, 2004, as the same stood during the period prior to 01/07/2012, has held the distribution of credit by Input Service Distributor among its various manufacturing units need not be in-proportion to the turnover of the units and it should be subject only to the conditions specified in the Rule in this regard i.e. condition (a), (b) and (c), that in view of this, there is no irregularity in the availment of Cenvat credit in respect of advertisement and sales promotion services by the corporate office as Input Service Distributor and distribution of this credit among its various manufacturing units including the Sahibabad, Alwar and Pithampura unit, that the appellant have strong prima facie case in their favour, that in any case the extended period of 5 years under proviso to Section 11A (1) of the Central Excise Act, 1944 is not available to the Department for recovery of allegedly wrongly availed Cenvat credit in as much as in the 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 corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture of a marketable products, that in terms of Clause (b) of Rule 7, the credit of service tax attributable to service used in a unit exclusively engaged in manufacture of exempted goods shall not be distributed, that in view of this, to the extent the sales promotion and advertisement service was used by the units exclusively engaged in manufacture of exempted goods, the Cenvat credit could not be distributed by the corporate office, that the contention of the appellant that the bar of Clause (b) of Rule 7 is applicable only to the service used in the manufacturing unit and is not applicable to the services of sales promotion and advertisement which are used outside the unit, is not correct, that in any case, the provisions of Rule 7 of the Cenvat Credit Rules have to be readwith the provisions of Rule 6 (1) of these Rules, that the appellant had not disclosed to the Department the manner of distribution of service tax Cenvat credit as Input Service 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,28,113/-, Rs. 5,32,18,665/- and Rs. 9,68,91,270/- respectively alongwith interest and also the penalty imposed on them under Rule 15 (2) and 15 (3) of the Cenvat Credit Rules, we find that during the period of dispute i.e. during the period prior to 01/07/2002, there was no provision that the credit distributed by the corporate office/head office of a company as Input Service Distributor to its manufacturing units or units providing Output Service should be in-proportion to their turnover. If such a provision had been there, to the extent the sales promotion and advertisement services were used by the units exclusively engaged in the manufacture of exempted final products, the Cenvat credit would not have been distributed. During the period of dispute, there were only three conditions prescribed in Rule 7 for distribution of credit by an Input Service Distributor and these three conditions were - (a) the credit distributed against 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case, the longer limitation period of 5 years would not be invokable. Since Sahibabad unit has deposited an amount of Rs. 1,00,00,000/-, and Alwar unit and Pithampura unit have deposited the amount of Rs. 1,55,70,602/- and Rs. 2,42,67,970/- respectively which represent the duty demand within normal period of one year from the relevant date, we are of the view that the amount already deposited by Sahibabad unit, Alwar unit and Pithampura unit is sufficient for hearing of their appeals and, as such, the requirement of pre-deposit of balance amount of Cenvat credit demand, interest thereon and penalty from them is waived for hearing of their appeals. As regards the penalty of Rs. 1,00,00,000/- imposed on the corporate office of the appellant company as (ISD) under Rule 6 (2) vide order-in-original No. 9-10/2013 (CE) COMMR passed by Commissioner of Central Excise, and Service Tax, Jaipur I, we are of prima facie view that the provisions of Rule 26 (2) are not attracted to this case and, hence, the requirement of pre-deposit of penalty is also waived. 10. The stay applications filed by the corporate office of the appellant company (Input Service Distributor), Sahibabad u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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