TaxTMI 
TaxTMI 
TaxTMI 
2022 (8) TMI 825
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....cord in the month of April, 2017, the Department observed that the ISD has appointed consignment sales agent (CSA) for sale promotion of tobacco. They have paid commission on sales and the sales agents have charged service tax on commission so received by them. The ISD has availed input service credit (ISC) of the same and has distributed the ISC to their units including the appellant proportionately on the turn over basis of the unit. Department formed an opinion that since the CSAs were appointed for the sale promotion of chewing tobacco, the Cenvat has wrongly been distributed by the ISD to the appellants who were engaged in manufacturing Kiwam. Relying upon Rule 7 C of Cenvat Credit Rules 2004 read with rule 7 B (post amendment) and also on Rule 2 (l) of Cenvat Credit Rules, 2004, department formed the opinion that the appellants have taken the inadmissible credit of Rs.3,60,700/- and of Rs.1,26,281 during the period 2014 -15 and 2015-16 (Total of Rs.4,86,981/-). Accordingly vide Show Cause Notice No. 413 dated 25.02.2019, the aforesaid amount of Cenvat Credit is proposed to be recovered from the appellant. Penalty is also proposed to be imposed. The said proposal has initially....
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.... were provided by the appellant to the audit team. Question of any malafide does not at all arise. It is submitted that there was no reason for invoking the extended period of limitation. The order under challenge is prayed to be set aside solely on this ground also on merits. Appeal is accordingly prayed to be allowed. 5. While rebutting these submissions made on behalf of the appellant, ld. DR has relied upon the findings of Commissioner (Appeals) in para 8, 9 and 10 of the order under challenge. No infirmity has been impressed upon in the said findings. Much emphasis has been laid on the facts that CSA service was received for sale promotion of tobacco. The appellant apparently and admittedly is not manufacturing tobacco but flavoured Kiwam. He was not entitled for the Cenvat Credit of the service which was not meant for the appellant. Impressing upon the correctness of the order under challenge appeal is prayed to be dismissed. 6. Having heard the rival contentions of the parties and perusing the entire record, I observe and hold as follows:- The availment of Cenvat Credit to the appellant has been denied relying upon the Rule 7 C of Cenvat Credit rules pre as well as ....
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....wing conditions, namely: - a) The credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon: b) The credit of service tax attributable as input service to a particular unit shall be distributed only to that unit, c) The credit of service tax attributable as input service to more than one unit but not to all the units shall be distributed only amongst such units to which the input service is attributable and such distribution shall be pro rata on the basis of the turnover of such units, during the relevant period, to the total turnover of all such units to which such input service is attributable and which are operational in the current year, during the said relevant period; d) The credit of service tax attributable as input service to all the units shall be distributed to all the units pro rata on the basis of the turnover of such units during the relevant period to the total turnover of all the units, which are operational in the current year, during the said relevant period; e) Outsourced manufacturing unit shall maintain separate account for input service credit received from each of the input service distrib....
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.... The bare reading of the above rules pre and post amendment makes it clear that, rule 7 prior to the amendment was giving an option to the assessee either distribute or not to distribute the Cenvat Credit, as is evident from word used i.e. "may distribute Cenvat credit". The amendment though is not applicable to the impugned period in demand, but to my opinion the amendment has made it mandatory for the ISD to distribute the input service to the various units providing output services as is evident from the word "shall" used in the amended provision. Both the provisions are more or less, otherwise, similar. The entire provision (pre as well as post amendment) is absolutely silent about the nature of the service received by the ISD, nature of the product manufactured by the ISD and particular unit to which the Cenvat Credit is to be distributed. The only requirement of the provision is that once the credit of service tax attributable to service used by one or more units exclusively engaged in manufacture of the goods shall be distributed on pro-rata basis. 8. Sub-clause (c ) of Rule 7 C therein requires that the credit of service tax attributable to service used wholly by a unit sh....
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....it, in accordance with law". 10. Since the appellant is observed to be dealing with the same product, though an ingredient thereof, as that being manufactured by ISD finally and for which the service in question was availed, hence even though the service precisely was not used in the appellant premises but in the different premises of the ISD Cenvat Credit cannot be denied by invoking rule 7 C of Cenvat Credit Rules. I lay my reliance on the decision in the case of Rajasthan Patrika Pvt. Ltd. Vs. Commissioner of Central Excise & GST, Jaipur reported as 2020 (34) GSTL 226, it was held in this case as follows:- "The Court below has observed in the impugned order, that had the appellant taken registration as an ISD distributor, the credit taken for the other centre, at the Jaipur office, service tax would not be attracted. Admittedly, for procedural deficiency, it has been held in several cases that the substantial benefit of the Cenvat credit provision, should not be denied. Further, I find that the situation is wholly Revenue neutral as all the four centres had paid service tax, also in cash and the Cenvat credit could have been distributed and thus availed by the other centres,....