TaxTMI 
TaxTMI 
2024 (2) TMI 768
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.... Duty was being paid by job worker in Parle Biscuits retail sale price (MRP) less permissible abatement u/S 4A of CEA. (iii) Job worker's factory was dedicated for Parle Biscuits and was an extended factory of Parle, manufacturing biscuits under Notification No. 36/2001- CE (NT) dated 26.06.2001, for and on behalf of Parle. (b) Whether the issue is no more res- integra in view of judgment of Larger Bench of Tribunal in the case of Krishna Food Products -2021-TIOL-294 (Tri.-LB), holding that distribution of credit, in identical case, was permissible for the period prior to 01.04.2016 as the amendment to Rule 7, CCR was clarificatory in nature and hence, applicable retrospectively, and covered under the expression "Unit" since working under Notification No. 36/2001-CE and manufacturing Biscuits on behalf of Parles. (C) Whether the extended period and penal provisions are invokable in the absence of any conscious or deliberate suppression of facts or mis-statement on the part of the Appellants, in a case where similar disputes were there with various CMUs of Parles and resolved in their favour either on limitation by various Benches or on merits itself by La....
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.... of credit by input service distributor.- The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following conditions, namely:- (a) ***** (c) ****** (d) credit of service tax attributable to service used by more than one unit shall be distributed pro rata on the basis of the turnover of such units during the relevant period to the total turnover of all its units, which are operational in the current year, during the said relevant period;" 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." AFTER 1.04.2016 Rule 2(m) "input service distributor" means an office of the manufacturer or producer of final products or provider of output service, which receives Invoices issued under rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credi....
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....as they stood prior to 01.04.2016, would be applicable. The observations are as follows : "From the above it is apparent that if anybody wants to avail input service credit, the above provisions of law has to be complied with prior to 01.04.2016. As per the definition of input service distributor' it has to be a service used by the manufacturer, whether directly or indirectly, in relation to the manufacture of final products and clearance of the final products up to the place of removal. In the present case, the manufacturer (M/s. Krishna Food) is the job-worker who has undertaken the processing of the goods supplied by M/s. Parle and the services on which credit is taken and distributed by M/s. Parle has nothing to do with the manufacturing operations undertaker by the M/s Krishna Food and, therefore, it is difficult to agree with the contention that the services received by M/s. Parle is an input service relating to the manufacture of goods by the job-workers (M/s. Krishna Foods). Secondly, input service distributor' means an office of the manufacturer or producer of final products. The office of M/s. Parle cannot be considered as an office of the job-worker (Kri....
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....ers manufacturing goods on their behalf and paying duty on their sales price/MRP, and this substitution has been made with a view to correct the mistake/lacuna in the earlier Rule and, hence, the same would have retrospective effect from the inception of the said Cenvat Rules. I find that the said amendment relied upon by the Appellants not only refute their contentions, on the contrary substantiate the adjudicating Authority's view. To which, let me enunciate the Rule 7 of the said Cenvat Rules, as substituted w.e.f. 1.04.2016., and is stands as under. 8.1.1 From the above Rule 7 effective from 01.03.2016, I find the words 'an outsourced manufacturing units, as defined in Explanation 4' have been newly inserted in Rule 7, further the said Explanation 4 defines 'an outsourced manufacturing Unit', which says 'outsourced manufacturing unit means a job-worker who is liable to pay duty or a manufacturer who manufacturers goods for the input service distributer. Thus, as regards to the contention of both the Appellants that as the Appellant No. 1 were working under the provisions of Notn. No. 36/2001-CE(NT) dated 26.06.2001, the Appellant No. 1 would be ....
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....ule 7 of the CENVAT Rules would have retrospective application. 18. The main submission of the learned Authorized Representative of the Department is that the manufacturer i.e. Krishna is a job-worker who has undertaken the processing of the goods supplied by Parle, and the services on which credit is taken and distributed by Parle has nothing to do with the manufacturing operations undertaken by Krishna. Thus, the services received by Krishna is not input service' relating to the manufacture of goods by the job-worker i.e. Krishna. It is also the submission that rule 7 of Credit Rules has been substituted with effect from 01-04-2016 and from the amendment made in the Rules, it appears that the manufacturers', 'its manufacturing units' and 'Job worker/contract manufacturing units are independent legal entities by themselves. Further, the amendment made in the Rules by substitution of the existing rule 7 of Credit Rules is prospective i.e. effective from 1-4-2016 only, which is evident from the transitional provisions contained in rule 7 (e) of the Credit Rules. 19. The provisions of CENVAT rule 2(m) and 7, as they stood prior to 01.04.2016 and ....
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....y other person or his authorized Agent) We M/s. Krishna Food Products, Dewas, holding Central Excise Registration AAJFR4928LSD001 of Dewas hereby accept the above authorization and agree to discharge all liabilities under the Central Excise Act 1944 and Rules made thereunder in the respect the said goods manufactured from time to Time by us on behalf of the above mentioned manufacturer For PARLE BISCUITS PVT. LIMITED (Authorised Signatory) Place: Dewas Date: 8/3/2011" 21. The terms and conditions agreed upon are also reproduced below: "Terms and Condition mutually agreed up on Parle Biscuits Pvt. Ltd., North Level Crossing, Vile Parle (East), Mumbai-400057 and M/s. Krishna Food Products, Plot No. 124-125, Siya, Dewas-Maxi Road, Destrict- Dewas.M.P.-455001.. (hereinafter called as Krishna Food) in respect of Biscuits on Job Work basis. 1. It has been decided that Krishna Food Products, would work as Job Worker for manufacturer of Biscuits for Parle Biscuits Pvt. Limited, Mumbal. 2. Parle Biscuits Pvt. Ltd. would arrange to send materials (Raw materials and Packing materials) through the supplier to Kris....
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....a registered person is required to undertake, like issuance in invoices, maintenance of records, filing of periodical returns, payment of duty etc. These requirements are met by the appellant, in terms of the undertaking submitted by the appellant. This would mean that the appellant steps into the shoes of Parle Since the duty is paid by the appellant, it follows that the credits are also claimed by the appellant. The Department has not objected to the availment of credits by the appellant on various inputs procured by Parle. What is disputed is the availment of credit on services distributed by Parle. 25. The office of Parle at Bahadurgarh is registered as a "input service distributor" under rule 2(m) of the CENVAT Rules. Biscuits were manufactured not only in the factories of Parle, but also in the factories of other contract manufacturers. It is stated that the quantity of biscuits manufactured by the appellant is reflected in the balance sheet of Parle as goods manufactured on behalf of Parle and sold and marketed by Parle. The excise duty paid on the biscuits cleared from the factory of the appellant is also accounted for in the balance sheet of Parle as duties paid b....
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.... that the importer should own a factory and he has to use the imported material only in his factory. Otherwise, the importer would not be entitled for the concessional assessment under the above Notification. If the importer uses the imported goods in a factory belonging to some other person he would not be entitled for the concessional assessment. The Tribunal's decision in the Panacea Bio-tech Ltd. case relied on by the Commissioner has broadly followed the above line of argument. In our view, the above approach is not at all in consonance with the philosophy of liberalisation and globalisation embraced by the Government of India in all its policies relating to Customs, Excise and Foreign Trade as revealed in a plethora of policy documents, legislation, and procedures. ********** ***** ********* The expression "his factory" should be interpreted to mean the factory where the importer wants to utilise the imported goods in terms of the Notification. The Department can not insist on ownership of the factory and deny registration for the purposes of the Notification. The Tribunal, in the case of Commissioner of Central Excise, Bangalore v. Electronic Research L....
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....istributor' means an office of the manufacturer or producer of final products. The office of M / s Merck cannot be considered as an office of the job-worker and, therefore, the definition of 'input service distributor' is not satisfied. Thirdly, Rule 7 deals with the manner of distribution, which specifically states that the input service distributor may distribute Cenvat credit of the service tax paid on the input service to its manufacturing units. The job-workers' factory is not the manufacturing unit of M / s Merck Specialties Ltd, but they are independent legal entities by themselves and, therefore, the question of distribution of credit by M / s Merck Specialties Ltd. to the job-workers does not satisfy the condition that the credit is distributed to its manufacturing units. It is a settled position of law that job-workers who actually undertake the manufacturing process is the 'manufacturer' of goods and not the supplier of raw materials. 5.7 In the light of these evidences available on record, it is crystal clear that the appellants are manufacturers on their own right and there is no manufacturing of goods on account of M / s Merck Specialt....
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....alties Pvt. Ltd. In the present case, it is clear from the letter of authorization given by Parle and accepted by the appellant that the appellant manufactured biscuits for and on behalf of Parle as a job worker. Parle was also required to send raw materials and packing materials. The appellant was required to process and carry out inspection of various depots as per the directions given by Parle. In fact, the raw materials and the finished goods were to remain the property of Parle. There can be no doubt that the appellant had effectively stepped into the shoes of Parle. The factual position in the present case and in Sunbell Alloys is, therefore, entirely different. 30. The decision of the Tribunal in FDC also needs to be referred to, wherein after relying upon the decision of the Tribunal in Tamil Trading Corporation, it was held : "4. We have carefully considered the submissions made by both sides and perused the records. The issue in dispute lies in a narrow compass that imported goods under exemption notification carrying condition of end use. Under Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 whether ....
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....axes paid on all services, which form part of the assessable value. Thus, advertisement, market research, sales promotion and marketing, of which credit has been distributed by Parle to the appellant and which services have also been specifically referred to in the press release, should be allowed. 34. According to the Department Parle, which has its own manufacturing units and also operates through contract manufactures, can distribute credits to its own units but cannot distribute credits to contract manufacturers who manufacture the goods for and on behalf of Parle though they operate on identical basis as the units of Parle. The interpretation put by the Department clearly seeks to dilute the spirit behind the CENVAT Rules and the Registration Exemption Notification. The whole purpose of CENVAT credit is to capture all costs so as to evade the cascading effect of duties and taxes. 35. A narrow and a literal interpretation of the phase its manufacturing units should, therefore, be avoided, more particularly when the Registration Exemption Notification provides for authorization for manufacture of goods on behalf of the principal manufacturer. There appears to b....
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....oner Customs (Import), Mumbai vs. Dilip Kumar and Company 2018 (361) E.L.T. 5777 (5.C)= 2018-TIOL-302-SC-CUS-CB to contend that a strict interpretation should be given to rule 7 of the CENVAT Rules. 39. The Constitution Bench of the Supreme Court in Dilip Kumar was constituted to examine what would be the interpretative rule to be applied while interpreting a tax exemption provision/ notification when there is an ambiguity as to its applicability with reference to the entitlement of the assessee or the rate of tax to be applied. The Supreme Court observed that the core issue to be examined in the event of any ambiguity in an exemption notification is whether the benefit of such an ambiguity should go to the assessee or should be considered in favour of the revenue by denying the benefit of the exemption to the assessee. The Supreme Court concluded that every taxing statue including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly. Further, in case of any ambiguity in a charging section, the benefit must necessarily go in favour of the assessee but the same would not be true for an exemption notification in regard to which ....
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....emptions generally in tax statutes. This being the case, a literal formalistic interpretation of the statute at hand is to be eschewed. We must first ask ourselves what is the object sought to be achieved by the provision, and construe the statute in accord with such object. And on the assumption that any ambiguity arises in such construction, such ambiguity must be in favour of that which is exempted. Consequently, for the reasons given by us, we agree with the conclusions reached by the impugned judgments of the Division Bench and the Full Bench." (emphasis supplied) 41. As noticed above, CENVAT is a beneficial scheme with the stated purpose of allowing CENVAT credit of all taxes paid on inputs and services so as to avoid cascading effect of taxes and duties. 42. Thus, even in terms of the provisions of rule 2(m) and rule 7 of the CENVAT Rules, as they stood prior to 01.04.2016, the appellant could distribute CENVAT credit in respect of the service tax paid on inputs services to its manufacturing units, including a job workers. 43. Such being the position, we also find substance in the contention advanced by learned counsel appearing for the ap....