TaxTMI 
TaxTMI 
2021 (11) TMI 899
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Credit Rules, 2004; appellants further proposed to demand credit of Rs. 19,92,836/- availed for the period during October 2010 to March 2015; during the course of Audit the appellants reversed credit of Rs. 28,04,34,114. The adjudicating authority dropped the demand for the period prior 1.4.2011 (Rs. 3,17,17,271) on the ground that trading is classified as an exempted service only from 1.4.2011 and observed that since assessee has reversed Rs. 67,04,088/- voluntarily, the relevant statutory provisions of Rule 6(2) prevalent during the material point of time, have been satisfied. With regard to the remaining demand of Rs. 43, 83,14,200, for the period from 04/2011 to 03/2015; the objection in the SCN was against inclusion of turnover of the Puducherry manufacturing unit, for quantification of total turnover under Rule 6(3). The adjudicating authority dropped the demand holding that the inclusion of turnover of Puducherry manufacturing unit for the purpose of quantification of amount under Rule 6(3A) is appropriate. Being aggrieved, the Appellants i.e., the Department have filed Appeal Nos. ST/21317/2018 on the grounds of appeal mentioned therein. 3. Mr. Rama Holla, Superintenden....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,17,271, is not legal and proper. (ii). with regard to remaining demand of Rs. 43,83,14,200/- under Rule 6(3A)(c)(ii) when trading stood clearly defined as exempted service for the period 4/2011 to 3/2015, the demand was raised on the grounds that the assessee has wrongly included the turnover of manufacturing unit. Puducherry manufacturing unit has separate Central Excise and Service Tax Registration and hence is a separate assessee in terms of the provisions of Central Excise as well as Service Tax; moreover, the manufacturing unit at Puducherry has no connection whatsoever with the exempted service i.e. trading provided by various premises of the assessee which a have a centralised registration for the payment of service tax; hence, the turnover of the said manufacturing unit cannot be taken into account for determination of amount for reversal under Rule 6(3A)(c)(ii) of CCR,2004 at Bangalore; 4. Shri Ravi Raghavan, Advocate, appearing for the Respondent submits, in respect of period prior to 1.4.2011, that the Respondents have reversed the proportionate credit of Rs. 67, 04,088 attributable to trading for the period 2010-11 under Rule 6(3A) of the Cenvat Credit Rule....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ionate basis as per Rule 6(3A) of the Cenvat Credit Rules, 2004 for the period April 2011 to October 2015: exclusion of turnover of the Puducherry Unit is incorrect as the Respondent being an ISD is required to follow the procedure under Rule 7 of the CCR, 2004 and Puducherry Unit is not a separate assessee. 4.2. Learned Counsel submits that the services on which the impugned credit has been taken are common to all the activities of the Respondent. Some of the common services are Advertisement service, Commercial Training and Coaching Services, Courier charges, Event Management charges, Manpower Recruitment, Supply Agency Service, Market Research Charges, Office Rent and Maintenance, Repairs and Maintenance, Security Services and Telecommunication Services; the Respondent is an ISD required to distribute credit as per Rule 7 of Cenvat Credit Rules, 2004; Department has taken into consideration only the corporate office / service unit of the Respondent as an assessee without considering the fact that the Respondent is an Input Service Distributor as defined in Rule 2(m) of the Cenvat Credit Rules, 2004; turnover of all the units has to be taken for reversal and distribution of cr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d be distributed to all the units of an assessee on proportionate basis based on the turnover of each of the said units; he relies on (i). Circular No. 178/4/2014-ST in F. No. 334/15/2014-TRU, dated 11.07.2014 (ii). Moser Baer India Limited Vs CCE, Noida, 2014 (36) STR 815 (Tri-Del) (iii). Ecof Industries Pvt. Ltd. v. CCE: 2010 (17) S.T.R. 515 (Tri.-Bang.) affirmed by Hon'ble Karnataka High Court 2011 (271) E.L.T.58 (Kar.) Hon'ble High Court has held that there are only two limitations imposed under Rule 7 of the Rules, for distribution of credit by a Input Service Distributor. Firstly, it cannot exceed the amount of service tax paid and secondly, the credit of service tax attributable to service used shall not be distributed in a unit exclusively engaged in the manufacture of exempted goods or providing of exempted services. 4. 3. Learned Counsel for the respondents submits that the contention of the Appellant Puducherry Unit is a separate assesse as it has separate registration both as a manufacturer and for Service tax purposes is not legally tenable and misplaced; Notification No.35/2001-CE (NT) read with Rule 9 of Central Excise Rules, 2002 and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se; the demand in the notice beyond the period of one and a half year can survive only where the ingredients mentioned in the proviso to Section 73(1) i.e. fraud or collusion or wilful misstatement or suppression of facts or contravention of any of the provisions of this chapter or of the rules made there under with intent to evade payment of service tax; the option of proportionate reversal was exercised as early as 2011 and accordingly department was aware of the fact of the reversal of credit; further, the Respondents have voluntarily reversed proportionate credit and the distribution of credit has been disclosed in the returns regularly; the insertion of the explanation under Rule 2(e) of CCR w.e.f. 01.04.2011 itself is indicative of the legislative recognition of existence of doubt regarding trading being an exempted service and consequent applicability of Rule 6 of the Cenvat Credit Rules, 2004; this further shows that the issue relates to bona fide interpretation of legal provision; the issue whether trading is an exempted service and whether the obligation to maintain separate books and to reverse proportionate credit provided in Rule 6 of the Cenvat Credit Rules is attract....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioner dropping the proposals in the impugned order; the Respondents have not suppressed any information from the department; they have been providing the department with all the details through the various letters mentioned above; the fact that the Department has actually conducted adjudication proceedings on the same issue for the earlier period; the periods covered are October 2010 to March 2015 i.e. the period specified in the proviso to Section 78(1); amended provisions are to be considered in case penalty is imposed on the Respondent; department cannot impose penalty in terms of Section 78 of the Finance Act, 1994 as well as under Section 76 ibid. 5. The brief issue before us in the instant case is to decide whether the turnover of a particular unit should be taken into consideration for arriving at the amount of tax credit to be reversed in terms of Rule 6(3A) of CENVAT Credit Rules, 2004. It is the case of the appellant department that as the Puducherry unit is separately registered under the provisions of Central Excise and Service Tax, the turnover of Puducherry unit should not be considered while computing the tax credit reversable by the head office of the respondents....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... vide F.No.334/15/2014-TRU dated 11.07.2014. 7. We find that for the period 01.04.2011, the issue stands decided in the case of Mercedes Benz India Pvt. Ltd. (supra) wherein it was held that trading is not an exempted service prior to 01.04.2011; provisions of Rule 6 requiring reversal of 6% of trading turnover is not applicable. We also find that the matter prescribed under Rule 6 of CCR, 2004, can be applied for the period before 01.04.2011 also as held by the Tribunal in the case of M/s TFL Quinn India Pvt. Ltd. (supra). We further find that for the period prior to 01.04.2011. We also find that the respondent's Puducherry Unit was issued a SCN No.52/2014 dated 24.09.2014 proposing to deny and recover the credit of Rs. 6,61,48,983/- for the period May 2011 to September 2013 availed on the basis of ISD invoices on the ground that the services are not input services in terms of Rule 2(l) of CCR, 2004; Commissioner vide OIO No.12/2016 dated 05.02.2016 accepted the correctness of the method followed by the respondent for distribution of credit in terms of CCR, 2004. It is not coming forth from the records of the case as to whether the Department has appealed against such order and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it to the sum total of the turnover of all the units to which the service relates. Explanation 1.- For the purposes of this rule, ―unit‖ includes the premises of a provider of output service and the premises of a manufacturer including the factory, whether registered or otherwise. Explanation 2.- For the purposes of this rule, the total turnover shall be determined in the same manner as determined under rule 5.' Ongoing through the above, we find that while after 01.04.2012, there is a clear provision that credit of service tax distributed should be pro rata to the basis of the turnover of the unit concerned. Before 01.04.2012, the only restriction was that credit is not distributable to a unit wholly engaged in provision of exempted service or production of exempted goods. 9. We find that Hon'ble Karnataka High Court has dealt with the very same issue in the case of ITC Ltd. (supra) and the Hon'ble High Court has held relying on the Division Bench decision in the case of Ecof Industries Pvt. Ltd. 2011 (271) ELT 58 held that there are only two limitations imposed under Rule 7 of the Rules, for distribution of credit by an Input Service Distri....