2023 (1) TMI 186 - AT - Central Excise

Tribunal allows Cenvat Credit distribution for manufacturing units.

Dabur India Limited Versus C.C.E & S.T. -Silvasa

The Tribunal allowed the appeals in favor of M/s. Dabur India Limited, holding that the Input Service Distributor (ISD) could distribute Cenvat Credit of ... CENVAT Credit - manufacture of taxable (trading) as well as exempt goods - It appeared to Revenue that credit of Service Tax attributable to service used in a Unit exclusively engaged in the manufacture of exempted goods was distributed by Input Service distributor, to Units which were manufacturing dutiable goods - availment of area based exemption - HELD THAT:- Reliance placed in the case of M/S DABUR INDIA LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, GHAZIABAD [2017 (5) TMI 599 - CESTAT ALLAHABAD] where it was held that Clause (b) of Rule 7 of the CCR, 2004 that existed during material time provided that such Cenvat credit of Service Tax paid was not admissible to be distributed which was exclusively used in unit engaged in the manufacture of exempted goods. Reliance also placed upon the case of M/S DABUR INDIA LTD. VERSUS CCE, JAIPUR-I [2017 (9) TMI 344 - CESTAT NEW DELHI] where similar view was adopted. The issue in the present appeals is no longer res-integra. Though the learned AR mentioned that all those Tribunal orders are appealed against before the respective jurisdictional high court, however in absence of any stay order by any of the High Courts, the Tribunal orders shall prevail. Hence, following the precedent decision of Tribunal in the Appellant’s own case and also following the judicial discipline as per which the decisions of the co-ordinate benches of the tribunal are binding on us, we do not find any merits in the impugned orders and the same are liable to be set aside. Appeal allowed. Issues Involved:1. Eligibility of Cenvat Credit distribution by Input Service Distributor (ISD) for services used in units manufacturing exempted goods.2. Applicability of Rule 7(b) of the Cenvat Credit Rules, 2004.3. Treatment of trading activities in relation to Cenvat Credit prior to 01.04.2011.4. Precedent decisions and their applicability to the present case.Detailed Analysis:Issue 1: Eligibility of Cenvat Credit Distribution by ISDThe appellants, M/s. Dabur India Limited, have multiple manufacturing units, some of which are exempt from duty under Notification No. 50/2003-CE. The central issue is whether the Input Service Distributor (ISD) at the corporate head office can distribute Cenvat Credit of input services used in exempt units to units manufacturing dutiable goods. The Revenue alleged that this distribution was improper under Clause (b) of Rule 7 of the Cenvat Credit Rules, 2004, which prohibits the distribution of credit attributable to services used in units exclusively manufacturing exempted goods.Issue 2: Applicability of Rule 7(b) of the Cenvat Credit Rules, 2004The appellants argued that the services in question, such as Advertisement and Sales Promotion Services, were not used exclusively in exempt units but were common services used across the organization. The Tribunal had previously settled similar disputes in favor of the appellants, stating that Rule 7(b) only restricts the distribution of credit for services used exclusively in exempt units. The show cause notices did not establish that the services were exclusively used in exempt units, thus making the credit distribution valid.Issue 3: Treatment of Trading Activities in Relation to Cenvat Credit Prior to 01.04.2011The appellants contended that trading activities were not considered exempted goods or services before 01.04.2011. The Commissioner's order to reverse the credit availed in relation to traded goods prior to this date was challenged. The appellants cited Board Circulars and judicial precedents to support their claim that trading was considered an exempted service only after the amendment of Rule 2(e) of the Cenvat Credit Rules, 2004, effective from 01.04.2011.Issue 4: Precedent Decisions and Their Applicability to the Present CaseThe appellants cited several Tribunal decisions in their favor, including:- Dabur India Limited (2017 (6) GSTL 106 (Tri.-All.)): This decision set aside demands against the ISD and recipient units, stating that the show cause notices did not establish exclusive use of services in exempt units.- Dabur India Limited (2017 (9) TMI 344-CESTAT New Delhi): This decision reiterated that the show cause notices did not prove exclusive use of services in exempt units.- Secure Meters Limited (2017 (3) GSTL 422 (Tri.-Del.)): This case supported the argument that services used at the corporate level could be distributed to units manufacturing dutiable goods.The Tribunal, adhering to judicial discipline and following the precedent decisions, found no merit in the impugned orders and set them aside. The appeals were allowed with consequential relief as per law.Conclusion:The Tribunal concluded that the appellants were entitled to the Cenvat Credit distributed by the ISD. It was established that the services were not used exclusively in exempt units, and the distribution of credit was valid. The Tribunal also recognized that trading activities were considered exempted services only after 01.04.2011. Consequently, the impugned orders were set aside, and the appeals were allowed with consequential relief.