TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 494
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....stened in show cause notice dated 3rd August 2012 despite its sale of manufactured goods and traced goods being only a portion of the total turnover for which liability had been discharged. 2. It would appear that the erstwhile M/s Faber Heatkraft Industries Ltd was contractually bound, under agreement of 2nd August 2008, to pay royalty at 3% of domestic sales and 4.5% of its overseas sales for 'technical know-how' to M/s Niro-Plan AG Switzerland and that, after doing so on account of sales at all three units, assigned the credit of tax discharged thereof to only one of the manufacturing facilities. During audit for the period at Unit II, it was ascertained that, during January 2007 to December 2007, the entire credit was taken by Unit I, even though it contributed to only 34.80% of total sales of which only 19.39% pertained to its manufactured goods. Furthermore, it was also observed that registration as 'input service distributor' had not been obtained by the appellant-company which had paid the tax as deemed recipient under section 66A of Finance Act, 1994. On receipt of details tax paid for each year from 2007-08 to 2011-12 on 10th January 2012, proposing recovery and penalty ....
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....ed to the three units for levy to be paid by the three undertakings; that has not been done and it is, therefore, not open to central excise authorities to conclude against liability having been complied with. Moreover, section 66A of Finance Act, 1944 operates in a separate sphere of its own in which the recipient of service is deemed as provider of service; the company has, as deemed provider of service discharged tax liability on 'royalty' payments during the period in dispute. The issue in dispute is, this, limited only to authority of the company to take the credit and further assign it to one of its manufacturing units. 5. The contention of Learned Authorized Representative that 'trading' turnover should be excluded from the computation of credit that Unit I is entitled to implies that eligibility to some credit is not indefensible and that dispute is only over the numbers. Effectively, this contention implies that distribution of credit of tax paid on 'royalty' charges should not be allowed, and only from the quantitative angle, to be in excess of that deployed in 'output service' thus disentitled from being 'input service' which would be known only at a later stage. There ....
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....ngly availed Cenvat credit in respect of service tax paid on royalty charges relating to trading sales as well as manufacturing sales on the strength of Challan showing payment of service-tax by the registered office of M/s Faber Heatkraft Industries Ltd., which is not a prescribed and a valid document under the provisions of Rule 4A of the Service lax Rules, 1994. It has been discussed in above paras that such availement of Cenvat credit is in contravention of the provisions of Rule 3(1) of Cenvat credit Rules.2004- it has been observed that the noticee purposely never declared to the department about availing Cenvat credit in respect of service tax paid on royalty charges relating to its trading sale as well as-manufacturing sales of its other units and they also availed such Cenvat on the strength of invalid documents and thereby wrongly availed such Cenvat credit with an intent to evade tax. Therefore, the provisions of Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11 AC of Central Excise Act. 1944 are rightly attracted in this case. As per Rule 15 (2) of Cenvat Credit Rules, 2004, in a case, where (he Cenvat Credit in respect of Inputs or Capital Goods or Input Ser....
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....of returns as prescribed in notification no. 38/05-CE (NT) dated 7th June 2005 as set out in '27. On going through the- above definition of input service distributor as well as the provisions of Service tax (registration of special category of persons). Rules, 2005 , it is observed that specific procedure has been prescribed for obtaining the service tax registration as input service distributor, for issuing invoices by such input service distributor for distributing Cenvat credit, for availing Cenvat on the basis of invoice in respect of input service distributor. In the present case registered office of M/s. Faber Heatkrafl Industries Ltd. have neither obtained registration as Input Service distributor nor they have followed any procedure for distributing Cenvat credit to its manufacturing units. Further, it is also observed that when initially objected such illegal distribution of Cenvat by the department at the lime of conducting audit, the noticee neither changed their practice of availment of Cenvat nor the registered office of M/s. Faber Heatkraft industries Ltd. followed the procedure prescribed as input Service distributor. It is also observed that majority of excise dut....