TMI Blog2022 (8) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... at Credit cannot be denied by invoking rule 7 C of Cenvat Credit Rules - keeping in view the peculiar fact of the present case that the appellant herein was manufacturing an inseparable essential ingredient for the final product of the ISD that the input service of sales agent availed by the ISD for promotion of tobacco is held to have rightly been distributed to the appellant. The sole reliance of the adjudicating authority below, on Rule 7 C, the amendment thereof, is held to be absolutely wrong also for the reason that amendment came into effect after the period of demand in the present case was over. Extended period of limitation - Suppression of facts or not - HELD THAT:- The only ground taken by the adjudicating authority is that the documents in relation to availment of credit were not the part of those ERs is held not acceptable in the light of the fact that appellant had never committed any default or delay while filing the ER Returns. The returns contained all the requisite details as that of the invoice numbers, the amount of invoice, the amount of service tax etc. Nothing has stopped Department to look into those invoices - the allegation of suppression of facts ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment formed an opinion that since the CSAs were appointed for the sale promotion of chewing tobacco, the Cenvat has wrongly been distributed by the ISD to the appellants who were engaged in manufacturing Kiwam. Relying upon Rule 7 C of Cenvat Credit Rules 2004 read with rule 7 B (post amendment) and also on Rule 2 (l) of Cenvat Credit Rules, 2004, department formed the opinion that the appellants have taken the inadmissible credit of Rs.3,60,700/- and of Rs.1,26,281 during the period 2014 -15 and 2015-16 (Total of Rs.4,86,981/-). Accordingly vide Show Cause Notice No. 413 dated 25.02.2019, the aforesaid amount of Cenvat Credit is proposed to be recovered from the appellant. Penalty is also proposed to be imposed. The said proposal has initially been confirmed vide order in Original bearing No.01/2021 dated 30th July, 2021. The appeal thereof has been rejected vide the impugned order in appeal (order under challenge). Being aggrieved the appellant is before this Tribunal. 2. I have heard Mr. Atul Sharma, ld. Counsel for the appellant and Ms.Tamanna Alam, ld. D.R. for the Department. 3. It is submitted on behalf of the appellant that reliance upon rule 7 C of Cenvat Credit Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner (Appeals) in para 8, 9 and 10 of the order under challenge. No infirmity has been impressed upon in the said findings. Much emphasis has been laid on the facts that CSA service was received for sale promotion of tobacco. The appellant apparently and admittedly is not manufacturing tobacco but flavoured Kiwam. He was not entitled for the Cenvat Credit of the service which was not meant for the appellant. Impressing upon the correctness of the order under challenge appeal is prayed to be dismissed. 6. Having heard the rival contentions of the parties and perusing the entire record, I observe and hold as follows:- The availment of Cenvat Credit to the appellant has been denied relying upon the Rule 7 C of Cenvat Credit rules pre as well as post amendment. Foremost it is necessary to look into the provision which reads as follows:- Rule 7C prior amendment: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be distributed only amongst such units to which the input service is attributable and such distribution shall be pro rata on the basis of the turnover of such units, during the relevant period, to the total turnover of all such units to which such input service is attributable and which are operational in the current year, during the said relevant period; d) The credit of service tax attributable as input service to all the units shall be distributed to all the units pro rata on the basis of the turnover of such units during the relevant period to the total turnover of all the units, which are operational in the current year, during the said relevant period; e) Outsourced manufacturing unit shall maintain separate account for input service credit received from each of the input service distributors and shall use it only for payment of duty on goods manufactured for the input service distributor concerned; f) Credit of service tax paid on input services, available with the input service distributor, as on the 31st March, 2016, shall not be transferred to any outsourced manufacturing unit and such credit shall be distributed amongst the units excluding the out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but to my opinion the amendment has made it mandatory for the ISD to distribute the input service to the various units providing output services as is evident from the word shall used in the amended provision. Both the provisions are more or less, otherwise, similar. The entire provision (pre as well as post amendment) is absolutely silent about the nature of the service received by the ISD, nature of the product manufactured by the ISD and particular unit to which the Cenvat Credit is to be distributed. The only requirement of the provision is that once the credit of service tax attributable to service used by one or more units exclusively engaged in manufacture of the goods shall be distributed on pro-rata basis. 8. Sub-clause (c ) of Rule 7 C therein requires that the credit of service tax attributable to service used wholly by a unit shall be distributed only to that unit but to my opinion that clause is also not applicable to the given fact that the final product of the ISD and both of its unit was chewing tobacco. At its other unit the appellant was manufacturing nothing different but the essential ingredients of its final product i.e. chewing tobacco. Had that product i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ISD Cenvat Credit cannot be denied by invoking rule 7 C of Cenvat Credit Rules. I lay my reliance on the decision in the case of Rajasthan Patrika Pvt. Ltd. Vs. Commissioner of Central Excise GST, Jaipur reported as 2020 (34) GSTL 226, it was held in this case as follows:- The Court below has observed in the impugned order, that had the appellant taken registration as an ISD distributor, the credit taken for the other centre, at the Jaipur office, service tax would not be attracted. Admittedly, for procedural deficiency, it has been held in several cases that the substantial benefit of the Cenvat credit provision, should not be denied. Further, I find that the situation is wholly Revenue neutral as all the four centres had paid service tax, also in cash and the Cenvat credit could have been distributed and thus availed by the other centres, and hence no gain. Accordingly, the appeals are allowed and the impugned orders are set aside. The appellant is entitled to consequential benefit, in accordance with law. 11. In view of entire above discussion and keeping in view the peculiar fact of the present case that the appellant herein was manufacturing an inseparable e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short paid or erroneously refunded because of either fraud, collusion, wilful misstatement, suppression of fact or contravention of any provision or rules. This Court has held that these, ingredients postulate a positive act and, therefore, mere failure to pay duty and/or take out a licence which is not due to any fraud, collusion or wilful misstatement or suppression of fact or contravention of any provision is not sufficient to attract the extended period of limitation. 13. Otherwise also, it is Departments own case that Show Cause Notice was issued on the basis of audit of the records maintained by the appellant. The alleged misrepresentation cannot be attributed to the appellant. The aforesaid decision of Hon ble Apex Court has been relied upon by Hon ble High Court of Madhya Pradesh in the case of Commissioner of Customs, Central Excise Service Tax, Indore vs. ZYG Pharma Pvt. Ltd. [2017 (358) ELT 101 (M.P.). 14. I have no reason to differ from the aforesaid findings for want of any evidence by the Department to prove the alleged suppression, fraud or collusion on part of the appellant to not to pay or to short pay the duty. It is held that Show Cause Notice should h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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