2016 (5) TMI 12 - HC - Service Tax

High Court affirms Tribunal's decision on Cenvat Credit in Central Excise Appeals

The High Court upheld the Tribunal's decision in Central Excise Appeals, affirming the admissibility of Cenvat Credit wrongly availed by the ... Cenvat credit - Common Input services belongs to three units but the whole of the credit was availed at one unit - Assessee contended that the units may be situated at different places but are under the common management and the Cenvat Credit has rightly been claimed. - Held that:- no substantial question of law arise out of the order of the Tribunal and the Tribunal has rightly found that all the three units had a common management and no contrary material was placed on record by the Commissioner while holding that there was no nexus in between the three units. By applying the judgment of Gujarat High Court in the case of Commissioner of Central Excise Vs. Dashion Ltd. [2016 (2) TMI 183 - GUJARAT HIGH COURT], the objection of the department therefore that the credit from one unit was utilized for the purpose of duty liability of other unit without pro rata distribution by the input service distributor therefore would not survive in view of no previous restriction of this nature flowing from Rule 7 of the Rules of 2004. The respondent has been able to prove that all the three units are one and the same, have common management and the Revenue has not been able to disprove this fact. - Decided against the revenue Issues:1. Admissibility of Cenvat Credit wrongly availed by the assessee.2. Interpretation of the term 'input service' in relation to the manufacture of goods.3. Nexus between different units under common management for Cenvat Credit eligibility.4. Application of Rule 7 for distribution of Cenvat Credit among units.Issue 1: Admissibility of Cenvat Credit:The case involved Central Excise Appeals against the order of the Customs, Excise and Service Tax Appellate Tribunal concerning Cenvat Credit availed by the respondent-assessee on various services. The Commissioner issued a show cause notice questioning the admissibility of the Cenvat Credit, alleging wrongful availment by the assessee. The Tribunal found in favor of the assessee, emphasizing the common management of the three units and allowed the appeals based on the judgment in the case of Doshion Ltd. Vs. CCE Ahmedabad.Issue 2: Interpretation of 'input service':The Commissioner, however, concluded that the Cenvat Credit was inadmissible, citing the definition of 'input service' and the requirement of a direct nexus with the manufacture of the final product. The Tribunal disagreed, highlighting the common management of the units and the admissibility of the Cenvat Credit. The High Court upheld the Tribunal's decision, noting that no substantial question of law arose and that the Tribunal correctly found a common management among the units.Issue 3: Nexus between units for Cenvat Credit eligibility:The appellant contended that the units were independent with no nexus between them, despite common management. However, the High Court found that the Tribunal's decision was justified, emphasizing the common management and lack of contrary evidence presented by the Commissioner to disprove the connection between the units. The High Court also referenced a related judgment involving Doshion Ltd. to support its decision.Issue 4: Application of Rule 7 for Cenvat Credit distribution:The High Court discussed Rule 7, which governs the distribution of Cenvat Credit by an input service distributor. It noted that the objection raised by the department regarding the utilization of credit from one unit for another without pro rata distribution did not hold, as the respondent had demonstrated the unity of the three units and common management. The High Court found the judgment in the case of Doshion Ltd. to be directly applicable and dismissed the appeals of the revenue as lacking merit.In conclusion, the High Court upheld the Tribunal's decision, emphasizing the common management of the units and the admissibility of the Cenvat Credit based on the unity of the three units under the respondent-assessee.