2024 (12) TMI 404 - AT - Central Excise

Input Service Distributors can distribute Cenvat credit to job work units for non-manufacturing operations

CESTAT Ahmedabad allowed the appeal regarding input service credit eligibility for non-manufacturing units. The tribunal held that Input Service ... Eligibility to avail and utilize the input service credit - appellant is not a manufacturing unit - Availment of credit on the strength of the invoices issued for distribution of service tax credit - HELD THAT:- The matter is no longer res-integra as in the case of Sweety Industries vs. CCE &C-Anand [2024 (2) TMI 768 - CESTAT AHMEDABAD] has held that Input Service Distributor is also entitled to distribute Cenvat credit of various input services to its job work units. The impugned order-in-original is devoid of any merits therefore, we set-aside the same. The appeal is accordingly, allowed. Issues Involved:1. Eligibility of the appellant to avail and utilize Cenvat credit distributed by the Input Service Distributor.2. Interpretation of Rule 7 of the Cenvat Credit Rules, 2004 concerning distribution of credit to job workers.3. Applicability of previous Tribunal decisions and judicial interpretations on similar matters.Issue-wise Detailed Analysis:1. Eligibility of the appellant to avail and utilize Cenvat credit distributed by the Input Service Distributor:The primary issue revolves around whether the appellant, a job worker for M/s. Syngenta India Limited, is eligible to avail Cenvat credit distributed by the Input Service Distributor (ISD). The department contended that the appellant is not a manufacturing unit of M/s. Syngenta India Limited and thus should not have availed credit on the invoices issued by the ISD. However, the appellant argued that Rule 7 of the Cenvat Credit Rules, 2004, allows distribution of credit to manufacturing units, including job workers. The Tribunal found that the matter is not res-integra, as previous decisions, such as in the case of Sweety Industries, have established that an ISD can distribute Cenvat credit to job work units.2. Interpretation of Rule 7 of the Cenvat Credit Rules, 2004 concerning distribution of credit to job workers:The appellant's counsel argued that Rule 7 does not differentiate between the principal manufacturer's own manufacturing units and job workers. The Tribunal referred to the decision in Sweety Industries, which held that the term 'its manufacturing units' includes contract manufacturers and job workers. The Tribunal emphasized that a narrow interpretation of this phrase should be avoided, as it would dilute the spirit of the Cenvat Credit Rules, which aim to avoid the cascading effect of duties and taxes. The Tribunal concluded that the appellant, as a job worker, is entitled to receive distributed credits under Rule 7.3. Applicability of previous Tribunal decisions and judicial interpretations on similar matters:The Tribunal relied on previous decisions, including those in the cases of Sweety Industries and Krishna Food Products, which supported the appellant's position. The Tribunal also considered the decision of the Karnataka High Court in CCE vs. Millipore India Pvt. Ltd., which underscored that services forming part of the assessable value should be eligible for Cenvat credit. The Tribunal noted that the Cenvat Credit scheme is a beneficial scheme intended to prevent the cascading effect of taxes. It was also observed that the amendments to Rule 7 post-2016 were intended to clarify existing provisions rather than change them, thus supporting the appellant's eligibility for credit distribution.Conclusion:The Tribunal set aside the impugned order, finding it devoid of merit, and allowed the appeal. The judgment affirmed that the appellant, as a job worker, is entitled to avail Cenvat credit distributed by the Input Service Distributor, aligning with the broader objectives of the Cenvat Credit Rules to prevent the cascading effect of taxes.