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Fosroc Chemicals India Pvt. Ltd. Versus Commissioner of Central Excise, Customs And Service Tax Bangalore-LTU

2016 (1) TMI 21 - CESTAT BANGALORE

Distribution of Cenvat Credit of input services received at Head office - Input Service Distributor (ISD) - credit exclusive related to one unit (which exempted) and distributed to other unit - Held that:- In terms of Rule 7(b), the service tax attributable to service used in a unit 'exclusively' engaged in the manufacture of exempted goods is not available. The expression 'exclusively' appearing in the said Rule relates to the unit and not to the service tax. The unit has to be exclusively enga .....

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lowing proportionate credit is upheld.

Levy of penalty for wrong utilization of credit - Rule 15(3) of the CENVAT Credit Rules - Held that:- The period involved in the present appeals is April 2006 to April 2010. - The said Rule provided maximum penalty of ₹ 2000/-

While confirming the demand of credit, penalty reduced - Decided partly in favor of assessee. - E/26512/2013-SM, E/26513/2013-SM - Final Order Nos. 22095-22096/2015 - Dated:- 29-10-2015 - Archana Wadhwa, Me .....

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ISD is availing the CENVAT Credit of service tax paid on various services received by them which are being used in all the three units. Whereas the units located at Kuluvanahalli and Ankleshwar are paying duty of excise on their final product, the unit at Rudrapur is enjoying the exemption in terms of area based exemption Notification No. 50/2003. The ISD has distributed CENVAT credit so availed to their two units located at Kuluvanahalli and Ankleshwar. 2. As a result of the audit conducted in .....

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r other Plants. The appellant immediately reversed the credit of ₹ 14,21,082/- involved in Appeal No. 26513/2013. As regards the second Appeal No. 26152/2013, it is seen that the issue relates to the proportionate reversal of the CENVAT credit relatable to the Rudrapur Unit inasmuch as the credit was availed on the common input services. 3. The lower authorities by referring to the provisions of Rule-7 of the CENVAT Credit Rules 2004, entertained a view that the ISD cannot avail the credit .....

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ri S. Ramasubramanian, C.A. for the appellant and Shri Ajay Saxena, A.R. for the Revenue, I find that there is no dispute on the factual position. Admittedly the appellant ISD has availed credit in respect of services which were either exclusively used in the Rudrapur or were partially used there. Further, Rudrapur is an exempted unit in terms of area based exemption notification. The provisions of CENVAT Credit Rules governing distribution of CENVAT Credit of an ISD are contained in Rule 7 of C .....

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thereon; (b) credit of service tax attributable to service [used by one or more units] exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed;" 5. In terms of Rule, 7(b) credit of service tax is not available where the services are used in a unit which is exclusively engaged in the manufacture of exempted goods. The contention of the learned advocate appearing for the appellant is that wherever services were exclusively used in Rudra .....

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n of demand of duty of ₹ 4.46 lakhs approximately, on proportionate basis involved in the second appeal. 6. However, I find no force in the above plea of the appellant. In terms of Rule 7(b), the service tax attributable to service used in a unit 'exclusively' engaged in the manufacture of exempted goods is not available. The expression 'exclusively' appearing in the said Rule relates to the unit and not to the service tax. The unit has to be exclusively engaged in the manu .....

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places. As such, the expression "exclusively" cannot be associated with the service tax availed by a unit manufacturing exempted goods. As such, I find no justification in the appellant's contention. Inasmuch as the said Rule debars taking of credit attributable to service tax used in a unit exclusively engaged in the manufacture of exempted goods and inasmuch as the Rudrapur unit is admittedly engaged in the manufacture of only exempted goods, I am of the view that the credit of s .....

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s of Rule 15(3) of the CENVAT Credit Rules. By drawing my attention to the said Rule, learned advocate submits that prior to 17.2.2010, the Rule read as under:- Confiscation and penalty. (1) If any person, takes CENVAT credit in respect of input or capital goods wrongly or in contravention of any of the provisions of these rules in respect of any input or capital goods, then, all such goods shall be liable to confiscation and such person, shall be liable to a penalty not exceeding the duty on th .....

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in terms of the provisions of section 11AC of the Excise Act. (3) If any person takes CENVAT credit in respect of input services, wrongly or in contravention of any of the provisions of these rules in respect or any input service, then, such person, shall be liable to a penalty which may extend to an amount not exceeding two thousand rupees." (4) In a case, where the CENVAT credit in respect of input services has been taken or utilised wrongly by reason of fraud, collusion,wilful mis-statem .....

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rules were amended with effect from 27.2.2010 and amended provisions read as under:- "Confiscation and penalty. - (1) If any person, takes or utilises CENVAT credit in respect of input or capital goods or input services, wrongly or in contravention of any of the provisions of these rules, then, all such goods shall be liable to confiscation and such person, shall be liable to a penalty [in terms of clause (a) or clause (b) of sub-section (1) of section 11AC of the Excise Act or sub-section .....

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[clause (c), clause (d) or clause (e) of sub-section (1) of section 11AC of the Excise Act.] (3) In a case, where the CENVAT credit in respect of input or capital goods or input services has been taken or utilized wrongly by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of these rules or of the Finance Act or of the rules made thereunder with intent to evade payment of service tax, then, the provider of output service s .....

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ervice tax. The said Rule provided maximum penalty of ₹ 2000/-. However, after the amendment, provisions of Rule 15(3) included the wrong availment of service tax in respect of input services. However, the assessee was to be imposed penalty only when the credit was availed wrongly by way of fraud collision or in willful misstatement of suppression of facts. He submits that in the 1 st case, the provisions of earlier Rule 15(3) which would apply, which provide for penalty for ₹ 2,000/ .....

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