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Lupin Limited, KR Gupta, Vijaykumar Kothiwale and Suresh Gargav Versus Commissioner of Central Excise, Thane –II

2016 (12) TMI 783 - CESTAT MUMBAI

Denial of CENVAT credit - no stated rationale for distribution of the credit to the appellant-assessee and that the input services cannot be said to have been used for directly or indirectly in the manufacture of output - credit availed on invoices dated prior to 10th September 2004 was also not eligible - whether the denial of credit on the ground that with a number of units and all having derived the benefit of services procured by headquarters, it was the responsibility of the ‘input service .....

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rder has objected to the distribution for failure to justify the proportion allocated to the Tarapur unit. There was no such allegation leveled in the show cause notice and the adjudicating authority appears to have travelled beyond the notice in holding that the dues are liable to recovery. - Also, reliance placed on the decision of the case of Castrol India Ltd v. Commissioner of Central Excise, Vapi [2013 (9) TMI 709 - CESTAT AHMEDABAD], where it has not been alleged in the show cause not .....

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rse the credits which are patently inadmissible. - The reasoning adopted by the adjudicating authority in the impugned order does not stand the test of legality. For that reason, we set aside the impugned order and allow the appeals - decided in favor of appellant-assessee. - APPEAL No:E/453 to 456/2007 - ORDER No.A/93820-93823/16/EB. - Dated:- 16-11-2016 - Dr. Satish Chandra, President And Mr. C J Mathew, Member (Technical) Ms Manasi Patil, Advocate for the appellant Shri S.V. Nair, Asstt. .....

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e Act, 1944, penalty of like amount under section 11AC of Central Excise Act, 1944 and penalties under Rule 26 of Central Excise Rules, 2002 on S/Shri K R Gupta, Vijaykumar A Kothiwale and Suresh R Gargav. These individuals are also in appeal against the impugned order. All four appeals are taken up for disposal in these proceedings. 2. From the impugned order it is seen that appellant-company with office at Mumbai and manufacturing establishments at Mandideep, Aurangabad, Ankleshwar, Tarapur an .....

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is no stated rationale for distribution of the credit to the appellant-assessee and that the input services cannot be said to have been used for directly or indirectly in the manufacture of output. It was also held that credit availed on invoices dated prior to 10th September 2004 was also not eligible. According to the adjudicating authority, with a number of units and all having derived the benefit of services procured by headquarters, it was the responsibility of the input service distributo .....

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ion of credit was well within the scope of rule 7 of CENVAT Credit Rules, 2004 as it stood prior to 1st April 2012. Conceding that restrictions were incorporated in the rules with effect from that date, she submitted that distribution prior to that date was not fettered. It was contended that section 11AC could not be invoked without reference to it in the show cause notice and that, in the absence of allegation incorporating ingredients for invoking the provisions of section 11AC, imposition of .....

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it of services availed for supporting the manufacture of output goods by the constituent units. The impugned order has objected to the distribution for failure to justify the proportion allocated to the Tarapur unit. There was no such allegation leveled in the show cause notice and the adjudicating authority appears to have travelled beyond the notice in holding that the dues are liable to recovery. 6. In Castrol India Ltd v. Commissioner of Central Excise, Vapi [2013 (291) ELT 469 (Tri.-Ahmd.)] .....

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case may be. According to Rule 7 of Cenvat Credit Rules, input service distributor may distribute the credit to its manufacturing units providing output service subject to following conditions, namely; the credit distributed against the documents referred to in Rule 9 does not exceed an amount of service tax paid thereof or; credit of service tax applicable to service used for unit exclusively engaged in the manufacture of exempted goods or providing of exempted services shall not be distribute .....

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ditions, no case can be said to have been made out. 6. We find considerable force in the arguments advanced by the learned counsel. It has not been alleged in the show cause notice nor there is finding that the credit distributed against the documents is more than the amount of service tax paid and in any case, this can be verified only at the end of ISD. It is also not the case of the department that credit has been received by the assessee in respect of services/goods which are totally exempte .....

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s advanced by the learned counsel. The registered office and Vatva office both are located in the same place and appellant has simply utilised the credit at Vatva instead of distributing it to various units. As submitted by the learned counsel, during the relevant period, there was no restriction for utilisation of such credit without allocating proportionately to various units. The omission to take registration as an Input Service Distributor can at best be considered as procedural irregularity .....

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n caused to the Revenue (infact Revenue has gained). In the absence of any legal requirement to avail credit based on the services received during the relevant time and in the light of the decision cited by the learned counsel, the procedural irregularity has to be ignored and the demand confirmed has to be set-aside on this ground. In the result, demand for Cenvat credit of ₹ 1,07,07,142/- with interest and penalty equal to the same imposed under Section 11AC of Central Excise Act, 1944 a .....

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ufacturing units or units providing output service, subject to the following condition, namely :- (a) the credit distributed against a document referred to in Rule 9 does not exceed the amount of service tax paid thereon; or (b) credit of service tax attributable to service use in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed. The said rule has been amended by Notification 18/2012-C.E., dated 17-3-2012 wherein clause (c) ha .....

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tor makes it clear that a manufacturer or a producer of a final product or a provider of output service may have more than one unit and may be distributed in various parts of the country. It is in this background the definition of service distributor is defined as office of the manufacturer or producer of a final product or provider of output service which receives invoices issued under Rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the .....

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te the said credit to its various units. At the time of distribution, the manner of distribution is provided in Rule 7 which reads as under :- Rule 7. Manner of distribution of credit by input service distributor. - The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following conditions, namely :- (a) the credit distributed against a document referred t .....

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