TMI Blog2024 (2) TMI 768X X X X Extracts X X X X X X X X Extracts X X X X ..... ger bench in the case of M/S. KRISHNA FOOD PRODUCTS, M/S. MARIAMMA R. IYER, M/S. PARLE BISCUITS PVT LTD. VERSUS THE ADDITIONAL COMMISSIONER OF CGST C. EX [ 2021 (5) TMI 906 - CESTAT NEW DELHI ] where it was held that It would not be necessary to answer the issue that whether the appellant would, irrespective of the answer to the first issue, be entitled to avail CENVAT credit when input service is attributed to the goods on which excise duty is paid and includes the cost of services on which credit was taken. From the above judgment, it can be seen that the issue involved in the present case has been settled in favour of the assessee. Accordingly, the impugned order in the present case is also not sustainable. The impugned order is set aside. Appeals are allowed. - HON'BLE MR. RAMESH NAIR , MEMBER ( JUDICIAL ) And HON'BLE MR. C. L. MAHAR , MEMBER ( TECHNICAL ) Ms. Padmavati Patil , Advocate for the Appellant Shri M. G Rayka , Learned Additional Commissioner ( AR ) for the Respondent ORDER RAMESH NAIR The following common issues are involved in both the appeals : - (a) Whether distribution of input service credit by the Principa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2.1 She submits that the very same issue has been considered by the Larger Bench in the case of Krishna Food Product 2021-TIOL-294 CESTAT-DEL-LB dated 25.05.2021, it was held that the contract manufacturer is entitled for the CENVAT Credit on the input used for manufacturing goods for their principal. 3. Shri M.G Rayka, Learned Additional Commissioner (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order. 4. We have carefully considered the submission made by both sides and perused the records. We find that all the issues involved in the present case have been answered by the larger bench in the case of Krishna Food Products vide order dated 25.05.2021, the same is reproduced below: 13. The submissions advanced by learned counsel for the appellant and the learned authorized representative for the Department have been considered. 14. The provisions of rule 2(m) of the CENVAT Rules, before the amendment and after the amendment and that of rule 7 before the substitution and after the substitution w.e.f. 01.04.2016 are reproduced below: PRIOR TO 1.04.2016 Rule 2(m) input service distributor means an office of the man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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; Explanation 1.- For the purposes for this rule, unit includes the premises of a provider of output service or the premises of a manufacturer including the factory, whether registered or otherwise or the premises of an outsourced manufacturing unit. Explanation 2. *** Explanation 3. *** Explanation 4. For the purposes of this rule, outsourced manufacturing unit means a job- worker who is liable to pay duty on the value determined under rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 on the goods manufactured for the input service distributor or a manufacturer who manufactures goods, for the input service distributor under a contract, bearing the brand name of such input service distributor and is liable to pay duty on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f raw materials. (emphasis supplied) 16. The Commissioner (Appeals) also examined the provisions of rules 2(m) and 7 prior to 01.04.2016 and also after 01.04.2016 and the observations are as follows : 8.1 The above definition of Rule 7, leaves no ambiguity of doubt that an Input Service Distributor can distribute the Cenvat Credit in respect of the Service Tax paid on the input service to its manufacturing units or units providing output service, only. Therefore, I am of the view that when there is an expressed provision in the Rule indicating the Government's Policy, the Adjudicating Authority or the Departmental Authority cannot take a contrary decision. The Appellants No. 1's No.2's main contention is that the appellant No. 1 were working under the provisions of Notn. No. 36/2001-CE(NT). dated 26.6.2001, they would be treated as the manufacturer on behalf of the Appellant No. 2 and/or extended arm/factory of the Appellant No.2 so far as all Central Excise formalities were concerned, and as Biscuits were manufactured by the Appellant No. 1 as per the specifications provided by the Appellant No. treating the Appellant No. 1's factory as their ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , effective from 01.04.2016, which reads as follows:- Further, I also find that the amendment to Rule 7 of the said Cenvat Rules, to allow an Input Service Distributor to distribute cenvat credit of input service tax credit to an outsourced manufacturing unit, have been made subject to some conditions detailed in clause (a) to (g) in the said Rule 7, and the condition no. (f) Categorically stipulates that- Credit of service tax paid on input services, available with the input service distributor, as on the 31st of March, 2016, shall not be transferred to any outsourced manufacturing unit and such credit shall be distributed amongst the units excluding the outsourced manufacturing units. Therefore, I am of the view that the provisions of Rule 7 of the said Cenvat Rules, as amended w.e.f 01.04.2016 are not clarificatory in nature and by no stretch of imagination can be applied retrospectively. ( emphasis supplied ) 17. The main submission advanced by learned counsel for the appellant is that input service credit is available to the appellant since the contract manufacturer steps into the shoes of the principal when operating under the Registration Exemption Notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge all liabilities under the Excise Act and the Rules made thereunder. 20. Parle authorized the appellant to manufacture on its behalf 'Biscuits' and to comply on its behalf all the procedural formalities under the Excise Act and the Rules made thereunder and also to furnish information relating to the price at which Parle would the biscuits in order to determine the valuation of the goods. The authorization given by Parle and accepted by the appellant are reproduced below: AUTHORISATION We M/s Parle Biscuits Pvt. Lid. Vile Parle (East). Mumbai-400057. Hereby authorize M/s. Krishna Food Products. Plot No. 124-125. Siva. Dewas-Maxi Road, Districe Dewas, M.P. 455 001., holding Central Excise Registration No. AAJFR4928LSD001 to manufacture on our behalf Biscuits falling under Central Excise Tariff No. 1905 90 20 and to comply on our behalf all the procedural formalities under the Central Excise Act 1944 and RULE made thereunder in respect of goods manufactured on our behalf and also to furnish information relating to the price at which M/s Parle Biscuits Pvt. Ltd., sell the said Biscuits products in order to enable determination of value of the said goods und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins the property of Parle Biscuits Pvt. Ltd., Mumbai. 22. It is clear from the aforesaid that the appellant accepted the authorization and agreed to discharge all liabilities under the Excise Act and Rules made thereunder in respect of the goods manufactured from time to time by the appellant on behalf of Parle. The terms and conditions also stipulate that the appellant would work as a job worker for manufacture of Biscuits for Parle and that Parle would arrange to send the raw materials and packing materials to the appellant on payment of Central Excise duty and that the appellant would avail CENVAT credit of Excise duty paid on the raw and packing materials and capital goods. It also provides that the appellant would made excise invoice/stock, Transfer Notes to Depots or Wholesalers of Parle and would pay Excise duty on the assessable value as shown in the invoice of Parle 23. It is in terms of the CENVAT Rules, the Registration Exemption Notification and the aforesaid authorization that it has to be determined whether input service credit is available to the appellant even prior to 01.04.2016. 24. It is seen that the Registration Exemption Notification specifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il Trading Corporation. The relevant portion is reproduced below : 6. We have gone through the records of the case carefully. The Customs Notification No. 21/2002-Cus. Provides concessional rate of duty for imported Crude Palm Oil for the manufacture of refined oil. Condition 5 of the Notification stipulates that the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. Before the introduction of the above Rules in 1996, each Notification was having end-use condition and the importer was normally required to produce the end-use certificate. However, the above rules were framed as an improvement over the earlier procedure. The above Rules are applicable to an importer who intends to avail of the benefit of an exemption Notification and where the benefit of such exemption is dependent upon the use of imported goods covered by the Notification for the manufacture of any excisable commodity. As per Rule 3 a manufacturer intending to avail the benefit of the exemption notification shall obtain a Registration from the Assistant Commissioner of Central Excise having jurisdiction over his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal with consequential relief, if any. ( emphasis supplied ) 28. The Commissioner (Appeals) relied upon the decision of the Tribunal in Sunbell Alloys which was decided on 17.10.2013 and learned Authorized Representative of the Department also placed reliance upon this decision. It needs to be noted that Sunbell Alloys relied upon the decision of the Tribunal in Panacea Biotec that was decided on 21.01.2003. The relevant portion of the decision is reproduced below : 5.3 Therefore, if anybody wants to avail input service credit, the above provisions of law has to be complied with. As per the definition of 'input service distributor' it has to be a service used by the manufacturer, whether directly or indirectly, in relation to the manufacture of final products and clearance of the final products up to the place of removal. In the present case, the manufacturer is the job-worker who has undertaken the processing of the goods supplied by M / s Merck Specialties Ltd. and the services on which credit is taken and distributed by M / s Merck has nothing to do with the manufacturing operations undertaken by the appellants and, therefore, it is difficult to ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied under Rule 7 has to be interpreted in terms of the ratio of the decision of the Tribunal in the case of Panasea Biotec Ltd. (cited supra). In that case, for availing the benefit of Notification 23/98 - Cus., a condition was prescribed that the importer should utilise the imported bulk drugs in the manufacture of life saving drugs in his factory. A question arose whether 'his factory' would include factory of job-worker and it was held that job-workers' factory will not come within the purview of his factory' mentioned in the said notification. In the present case, the expression used is its manufacturing unit . The said expression would mean that the manufacturing unit of the input service distributor and not that of the job-worker and, therefore, the contention of the appellants that they are eligible for the input service credit distributed by M/s. Merck Specialties Ltd. is not in accordance with the provisions of input service distribution scheme envisaged under CCR, 2004. ( emphasis supplied ) 29. It needs to be noted that in Tamil Trading Corporation, it was held that Panacea Biotec was not correctly decided. Not only this it was found as a fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contract manufacturer, even when operating under the Registration Exemption Notification, cannot be termed as a manufacturing unit of the principal. 32. It also needs to be remembered that CENVAT credit scheme seeks to avoid cascading effect, as would be clear from the press release dated 12.08.2004 issued by the Press Information Bureau, Government of India Ministry of Finance, relating to the draft CENVAT credit rules. The relevant portion is reproduced below : (iii) In principle, credit of tax on those taxable services would be allowed that go to form a part of the assessable value on which excise duty is charged. This would include certain services which are received pri prior to commencement of manufacture but the value of which gets absorbed in the value of goods. As regards services received after the clearance of the goods from the factory, the credit would be extended on services received upto the stage of place of removal (as per section 4 of Central Excise Act). In addition to this, services like advertising, market research etc. which are not directly related to manufacture but are related to the sale of manufactured goods would also be permitted for cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee would be entitled to Cenvat credit of the tax so paid. In the appellant's own case this Tribunal has in its Order No. A/225/14/EB/C- II, dated 3-3-2014 [2014 (36) S.T.R. 467 (Tribunal)] = 2014-TIOL-768- CESTAT-MUM held that if the cost of various services availed if it forms part of the assessable value of the goods manufactured and sold by the appellant, there was no reason to deny Cenvat credit of the duty/taxes paid on various inputs/input services availed, for undertaking the business operations. The ratio laid down by the Hon'ble Tribunal has been accepted by the Revenue and no appeal has been filed against the same. 8.1 It can be seen from the above reproduced relevant paragraphs from the judgment of the Hon'ble High Court the ratio is very clear inasmuch as the Cenvat credit has to be allowed in respect of the service tax which has been paid and which forms a part of the value of the finished goods on which excise duty is charged. ( emphasis supplied ) 37. In the present case the appellant is paying duty on the sale price fixed by the principal, which includes all costs including sales promotions and marketing. 38. Learned Authorized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons which have a beneficial purpose and the observations are as follows: 23. It may be noticed that the 5-Judge Bench judgment (Dilip Kumar) did not refer to the line of authority which made a distinction between exemption provisions generally and exemption provisions which have a beneficial purpose. We cannot agree with Shri Gupta's contention that sub- silentio the line of judgments qua beneficial exemptions has been done away with by this 5- Judge Bench. It is well settled that a decision is only an authority for what it decides and not what may logically follow from it (see Quinn v. Leathem [1901] AC 495 as followed in State of Orissa v. Sudhansu Sekhar Misra (1968) 2 SCR 154 at 162,163). 24. This being the case, it is obvious that the beneficial purpose of the exemption contained in Section 3(1)(b) must be given full effect to, the line of authority being applicable to the facts of these cases being the line of authority which deals with beneficial ewe must first ask ourselves what is the object sought to be achieved by the provision, and construe the statute in accord with such object. And on the assumption that any ambiguity arises in such construction, such a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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