2018 (2) TMI 618 - AT - Central Excise

Appeals granted for denied credit due to exempted units under CENVAT Credit Rules

The Appeals were filed against the denial of credit to the Silvassa Unit for input services attributable to exempted units under Rule 7(b) of the CENVAT ... Demand confirmed with interest and penalty - Alleging that their Silvassa Unit had availed inadmissible credit to the extent of input services attributable to their exempted units - show cause notice issued for recovery - Held that:- As decided in assesee's own case show Cause Notice nowhere established that the Cenvat credit which was proposed to be recovered was used in a unit exclusively engaged in manufacture of exempted goods. It is admitted that the Services such as Advertisement Service & Sales Promotion Services, were utilized in Corporate Office, Kaushambi, Ghaziabad. The ld. Counsel also contended that both the Show Cause Notices are hit by limitation. He has also contended that the second Show Cause Notice is repetition of the first Show Cause Notice. We keep the issue of limitation open. We set aside both impugned Order-in-Original and allow both appeals. The appellants shall be entitled for consequential relief, if any, as per law. Issues:1. Applicability of Rule 7(b) of CENVAT Credit Rules, 2004 in availing credit.2. Denial of credit to Silvassa Unit for input services attributable to exempted units.3. Allegations of inadmissible credit and recovery of amounts.4. Adjudication of demand with interest and penalty.5. Comparison with judgments of Allahabad and Delhi Tribunals.6. Findings of the Tribunal regarding the methodology of credit distribution.7. Consideration of limitation in the Show Cause Notices.8. Repetition of Show Cause Notices and their impact on the case.Analysis:1. The Appeals were filed against the Order-in-Appeal passed by the Commissioner (Appeals), Central Excise & Customs, Vapi, concerning the denial of credit to the Silvassa Unit for input services attributable to exempted units. The Appellants distributed CENVAT credit by issuing invoices as an Input Service Distributor (ISD), leading to a show cause notice for recovery of amounts with interest and penalty.2. The main contention was the denial of credit to the Silvassa Unit based on the alleged non-compliance with Rule 7(b) of the CENVAT Credit Rules, 2004. The Appellants argued that similar cases in other jurisdictions had been decided in their favor, citing judgments from the Allahabad and Delhi Tribunals in support of their position.3. The Allahabad Tribunal's judgment highlighted the absence of specific provisions invoked in the Show Cause Notice, the lack of legal basis for the methodology used in credit distribution, and the failure to establish the exclusive use of credit in units engaged in the manufacture of exempted goods. The Tribunal set aside the Order-in-Original and allowed the appeals, emphasizing the issue of limitation and the repetition of Show Cause Notices.4. Following the Allahabad Tribunal's decision, the Delhi Bench also ruled in favor of the Appellant, setting aside the impugned orders and allowing the appeals based on judicial discipline and precedent. The Appellants were granted consequential relief as per the law.5. The judgments from the Allahabad and Delhi Tribunals played a crucial role in overturning the decisions against the Appellants, emphasizing the importance of legal provisions, proper methodology, and adherence to judicial principles in determining the admissibility of CENVAT credit and resolving disputes related to the recovery of amounts and penalties.6. The analysis underscored the significance of legal precedents, procedural compliance, and the interpretation of relevant rules in resolving disputes related to CENVAT credit availed by units with exempted goods, showcasing the impact of tribunal decisions on similar cases and the application of legal principles to ensure fair and just outcomes in tax-related matters.