TMI Blog2021 (11) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... It is not coming forth from the records of the case as to whether the Department has appealed against such order and if so, the outcome of the same. While holding that the Department is not precluded from issuing SCN to the head office of the Respondents as res judicata would not apply to taxation matters, it is found that there is a dichotomy in the approach of the appellant department. The benefit of doubt should go the appellants. Coming to the period subsequent to 01.04.2011 when trading came to be considered as an exempted service, we find that the appellants have reversed credit, of ₹ 27,37,30,026/- for the period 2011-12 to 2014-15, in terms of Rule 6(3A) of CCR, 2004, on proportionate basis - Hon ble Karnataka High Court has dealt with the very same issue in the case of THE COMMISSIONER OF CENTRAL EXCISE BANGALORE - IV (ERSTWHILE BANGALORE - II) COMMISSIONERATE VERSUS M/S. ITC LIMITED [ 2021 (5) TMI 366 - KARNATAKA HIGH COURT] and the Hon ble High Court has held relying on the Division Bench decision in the case of COMMISSIONER OF C. EX., BANGALORE-I VERSUS ECOF INDUSTRIES PVT. LTD. [ 2011 (2) TMI 1130 - KARNATAKA HIGH COURT] held that there are only two limitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein. 3. Mr. Rama Holla, Superintendent, Authorised Representative for the appellant/ Revenue, reiterates the grounds of appeal and submits, inter alia, that: (i). as regards the issue relating to the period prior to 1.4.2011, the decision of adjudicating authority to drop the demand and uphold the reversal of part amount of ₹ 67,04,088/- instead of ₹ 3,84,21,359, appears to be not legal and proper; though trading was not exempted service prior to 1.4.2011, it is clear that trading was not a taxable service either; the condition of allowing Cenvat Credit only in respect of taxable service is to be adhered to during the period prior to 1.4.2011 also; the ineligible cenvat has been calculated on proportionate basis as ₹ 3,17,17,271 after duly adjusting the amount of ₹ 67,04,088/- voluntarily paid by the assessee and has been demanded; the proportionate credit has been calculated as Trading turnover/total turnover *the total Cenvat Credit availed; in the case of Maruti Suzuki India Vs CCE, Delhi-III reported in 2009(240) ELT 641 (S.C), it has been held that the assessee is entitled to credit on the eligible inputs utilised in the generation of electricit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the period 2010-11 under Rule 6(3A) of the Cenvat Credit Rules, 2004 and the same has been accepted by the Department (Para 2.1.3 of the Show Cause Notice and Para 22.2 of the Order-in-Original); the issue of availment of proportionate credit on common input services attributable to trading for the period prior to April-2011; CESTAT in the case of Mercedes Benz India Pvt Ltd Vs CCE 2014-TIOL-476-CESTAT-MUM, held that trading is not an exempted service prior to 01.04.2011, as Explanation to Rule 2(e) inserted vide Notification dated 01.03.2011 w.e.f. 01.04.2011 providing trading is an exempted service is not applicable retrospectively; trading not being an exempted service, the provisions of Rule 6 requiring reversal of 6% of the trading turnover is not applicable; trading is not service prior to 1-4-2011, hence, not exempted service and credit is therefore not entirely allowed and Credit should be apportioned with reference to turnover of manufactured goods and traded goods. Tribunal, in the case of M/s TFL Quinn India Pvt Ltd Vs CC CE, Hyderabad-IV, 2016-TIOL-856-CESTAT-HYD held that for determining the quantum of proportionate credit the method prescribed under Rule 6 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 004; turnover of all the units has to be taken for reversal and distribution of credit as per mechanism provided under Rule 7 of the Cenvat Credit Rules, 2004; corporate office of the Respondent which is situated in Bangalore receives invoices issued under Rule 4A of the Service Tax Rules, 1994 by service providers and issues ISD invoices for distributing the credit of service tax on the said services to the manufacturing unit/service unit; the credit of service tax paid on the services received which are common to Puducherry manufacturing unit, service unit in the headquarters and the trading unit in the headquarters are taken at the corporate office which has a centralized registration as a service provider / recipient and as an ISD; since the Respondents are an ISD, remainder of the credit after reversal gets distributed by way of ISD invoices; in the Respondent s Puducherry factory, only dutiable goods are manufactured; the taxable service and trading is carried on from various other places located across the country; since the accounts of the Respondent are maintained in Bangalore, registration as an ISD has been obtained in Bangalore; entire activities including those relat ..... 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No.35/2001-CE (NT) read with Rule 9 of Central Excise Rules, 2002 and Section 6 of the Central Excise Act, 1944, makes it clear that if the person has more than one premises, separate registration shall be obtained for each of such premises. ; similarly, Rule 4 (3A) of the Service Tax Rules, 1994 requires separate registrations for each of the premises from where taxable services are provided; Respondent s factory discharges service tax only on GTA services and on reverse charge basis on import of certain services which are directly related only to the Respondent s manufacturing activities for which bills are also directly raised by the service providers in the factory s name; the factory unit of the Respondent does not discharge service tax which relate to services that are common in nature; the argument of the appellant that every factory and every premises from where services are provided which are registered with the Department should be treated as a separate entity, the scheme of Input Service (tax) distribution in terms of Rule 2(m) read with Rule 7 of the CENVAT Credit Rules, 2004 would become redundant; the manufacturing unit of the Respondent falls within the same contro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionate credit provided in Rule 6 of the Cenvat Credit Rules is attracted in respect of common input services used in providing trading is a contentious issue considered in many cases. Therefore, by the above reasons extended period cannot be invoked; when the proposal to demand itself is based on the audit objection, there cannot be any suppression on the part of the Respondent. In such a situation, the Respondent submits that the extended period cannot be invoked. 4.5. He relies on the following cases to support above claims. (i). Pushpam Pharmaceuticals Company Vs CCE, Bombay, 1995 Supp. (3) SCC 462; (ii). Cosmic Dye Chemical Vs CCE, Bombay, (1995) 6 SCC 117; (iii). Easland Combines, Coimbatore Vs CCE, Coimbatore, (2003) 3 SCC 410; (iv). Anand Nishikawa Continental Foundation Joint Venture Vs Commissioner, 2007 (216) ELT 177 (SC); (v). CCE, Bangalore-III v. Mac Charles (India) Ltd., 2010 (254) ELT 59 (Kar.) (vi). Krishna Auto Sales Vs CCE - 2015-TIOL-2994-CESTAT-DEL (vii). M/s. TFL Quinn India Pvt Ltd Vs CCE, Hyderabad reported in 2016-TIOL-856-CESTAT-HYD (viii). Mahindra Mahindra Ltd Vs CCE, Mumbai 2018 (364) ELT 1006 (Tri - Mumbai) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the head office of the respondents who are also registered as Input Service Distributors. It is the claim of the respondent/assessee that the respondent is an ISD and accordingly issue invoices for distributing the credit of service tax to all manufacturing/service units; they have to distribute credit as per the mechanism set out in Rule 7 of the CCR, 2004. He further submits that in terms of Notification No.35/2001-CE (NT) read with Rule 9 of Central Excise Rules, 2002 and Section 6 of Central Excise Act, 1944 if the person has more than one premises, separate registration shall be obtained for each such premises; similarly Rule 4(3A) of Service Tax Rules, 1994 requires separate registration for each of the premises from which taxable services are provided . 6. Learned Counsel for the respondents submits that in terms of Rule 7 of CCR, 2004, it is essential that the turnover of all the units be taken into consideration while computing the credit to be transferred as laid down in Rule 7 (d) of CCR, 2004; in terms of Explanation 2 to Rule 7 Turnover shall be determined in the same manner as under Rule 5 of CCR, 2004 which states that Total Turnover means some total of value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has appealed against such order and if so, the outcome of the same. While holding that the Department is not precluded from issuing SCN to the head office of the Respondents as res judicata would not apply to taxation matters, we find that there is a dichotomy in the approach of the appellant department. We find that the benefit of doubt should go the appellants. 8. Coming to the period subsequent to 01.04.2011 when trading came to be considered as an exempted service, we find that the appellants have reversed credit, of ₹ 27,37,30,026/- for the period 2011-12 to 2014-15, in terms of Rule 6(3A) of CCR, 2004, on proportionate basis. We find that Rule 7 of Cenvat Credit Rules, 2004 prior to 1.04.2012 and after 01.04.2012 reads as: Prior to 01.04.2012 Manner of distribution of credit by Input Services 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributor. Firstly, it cannot exceed the amount of service tax paid and secondly, the credit of service tax attributable to service used shall not be distributed in a unit exclusively engaged in the manufacture of exempted goods or providing of exempted services. The manufacturer is therefore, requires registering himself as Input Service Distributor and thereafter is entitled to distribution of credit of such input in the manner prescribed under the law. 10. We find that the learned Commissioner finds that: in this connection, on scrutiny of the service tax registration certificate issued for Puducherry unit is seen that the registration for service tax at Puducherry is only for payment of service tax under reverse charge mechanism on GTA services and on import of taxable services from abroad, which are meant exclusively for the Puducherry manufacturing unit. With regard to the entire remaining activities of the said Puducherry manufacturing unit, the centralized service tax registration No.AABC13372HST001 at Bangalore is applicable, which is as a SERVIVE PROVIDER as well as an INPUT SERVICE DISTRIBUTOR. Thereby, inclusion of the turnover of the Puducherry manufacturing unit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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