TaxTMI 
TaxTMI 
2024 (7) TMI 1826
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for use in manufacture of Biscuits on behalf of principal. The appellant do not manufacture any final product either on their own account or for others. Accordingly, the appellant has availed the Cenvat credit of input services in respect of biscuits manufactured by them at their factory. The said credit was availed on the basis of ISD invoices issued by M/s Parle. A show cause notice dated 30.11.2016 was issued on the allegation that Cenvat credit availed on ISD invoice issued by M/s Parle Biscuits during the period August- 2015 to October-2015 is in contravention of erstwhile Rule 7 of Cenvat Credit Rules, 2004 which allows distribution of Cenvat Credit by ISD to its manufacturing unit as the assessee is a separate entity and not unit of Parle, hence the proposal for recovery of wrongly availed Cenvat credit along with interest and penalty was made. The show cause notice has been adjudicated whereby the demand of Cenvat credit along with interest and penalty was confirmed. Being arrived by the Order-In-Original, the appellant filed appeal before the Commissioner (Appeals) which was dismissed by the Commissioner (Appeals) upholding the order of the original authority. Therefore, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r extending Cenvat Credit is through ISD invoices, as the contract manufacturing unit is nothing but a unit working on behalf of principal manufacturer. 4.1 It is also not disputed that the input services have been used in relation to the manufacture of final product in the unit of contract manufactther and excise duty on the final product is discharged. Therefore, we are of the clear view that the Cenvat credit was rightly availed by the appellant being a contract manufacturing unit on the ISD invoices issued by the principal manufacturer. This issue is no longer res-integra, as the same has been decided by the Larger Bench of this Tribunal, in the case of M/s. Krishna Food Products, M/s Mariamma R. Iyer, M/s. Parle Biscuits Pvt. Ltd. Vs. the Additional Commissioner of CGST and C. Ex. 2021 (5) TMI 906-CESTAT (Delhi) wherein the following order was passed: - "13. The submissions advanced by learned counsel for the appellant and the learned authorized representative for the Department have been considered. 14. The provisions of rule 2(m) of the CENVAT Rules, before the amendment and after the amendment and that of rule 7 before the substitution and after the sub....
X X X X Extracts X X X X
X X X X Extracts X X X X
....b) ***** (c) ***** (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 distributors and shall use it only for payment of duty on goods manufactured for the input service distributor concerned; (f) Credit of service tax paid on input services, available with the input service distributor, as on the 31st of March, 2016, shall not be transferred to any outsourced manufacturing unit and such credit shall be distributed amongst the units excluding the outsourced manufacturing units. Explanation 1.- For the purposes for this rule, "unit" includes the premises of a provider of output service or the premises of a manufacturer including the factory, whether registered or otherwise or the premises of an outsourced manufacturing unit. Explanation 2. ***** ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... its manufacturing units. The job workers' factory (M/s. Krishna Foods is not the manufacturing unit of M/s. Parle but they are independent legal entities by themselves and, therefore, the question of distribution of credit by M/s. Parle to the job-workers (M/s. Krishna Foods) does not to satisfy the condition that the credit is distributed to its manufacturing units. It is a settled position of law that job-workers (M/s. Krishna Foods) who actually undertake the manufacturing process are the manufacturer' of goods and not the supplier of raw materials." (emphasis supplied) 16. The Commissioner (Appeals) also examined the provisions of rules 2(m) and 7 prior to 01.042016 and also after 01.04.2016 and the observations are as follows: "8.1 The above definition of Rule 7, leaves no ambiguity of doubt that an Input Service Distributor can distribute the Cenvat Credit in respect of the Service Tax paid on the input service to its manufacturing units or units providing output service, only. Therefore, I am of the view that when there is an expressed provision in the Rule indicating the Government's Policy, the Adjudicating Authority or the Departmental Author....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rules. 8.1.2 Further, as regards both the appellants' contention that the said amendment to rule 7 is applicable retrospectively, I am the view such contentions fail to stand, as in-term of Rule 7 of said Cenvat Rules credit distribution has been allowed by amending the said Rule by way of Notification No. 13/2016-CE(NT) dated 01/03/2016 which is applicable w.e.f. 01/04/2016. As an amendment has also been made in Rule 2(m) of the said Cenvat Rules, which amended the definition of "Input Service Distributor", effective from 01.04.2016, which reads as follows:- Further, I also find that the amendment to Rule 7 of the said Cenvat Rules, to allow an Input Service Distributor to distribute cenvat credit of input service tax credit to an outsourced manufacturing unit, have been made subject to some conditions detailed in clause (a) to (g) in the said Rule 7, and the condition no. (f) Categorically stipulates that-"Credit of service tax paid on input services, available with the input service distributor, as on the 31st of March, 2016, shall not be transferred to any outsourced manufacturing unit and such credit shall be distributed amongst the units excluding the outsou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....goods manufactured on his account from any other person subject to the conditions that the said manufacturer authorises the person, who actually manufactures to comply with all procedural formalities in respect to the goods manufactured on behalf of the said manufacturer and, in order to enable the determination of value to the said goods under section 4 or 4A of the Excise Act, to furnish information including the price at which the said manufacture is selling the goods and the person so authorised agrees to discharge all liabilities under the Excise Act and the Rules made thereunder. 20. Parle authorized the appellant to manufacture on its behalf 'Biscuits' and to comply on its behalf all the procedural formalities under the Excise Act and the Rules made thereunder and also to furnish information relating to the price at which Parle would the biscuits in order to determine the valuation of the goods. The authorization given by Parle and accepted by the appellant are reproduced below: "AUTHORISATION We M/s Parle Biscuits Pvt. Lid. Vile Parle (East). Mumbai-400057. Hereby authorize M/s. Krishna Food Products. Plot No. 124-125. Siva. Dewas-Maxi Road, Districe-De....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er the county as per the direction given by Parle Biscuits Pvt. Ltd. Mumbai. 5. Loss of Non-standard materials would be borne by Krishna Food Products, depending upon nature of the case. 6. Biscuits will produced and packed in wrappers/cartoons (C.B.). 7. Krishna Food Products, would make Excise Invoice/Stock Transfer Notes (STN's) to Depots/or Wholesalers of Parle Biscuits Pvt. Ltd. and would pay Excise duty on assessable value as shown in the Invoice of M/s. Parle Biscuits Pvt. Ltd. Mumbai. 8. The raw material and finished goods remains the property of Parle Biscuits Pvt. Ltd., Mumbai. For PARLE BISCUITS PVT. LTD., For KRISHNA FOOD PRODUCTS (Authorised Signatory) (Authorised Signatory)" 22. It is clear from the aforesaid that the appellant accepted the authorization and agreed to discharge all liabilities under the Excise Act and Rules made thereunder in respect of the goods manufactured from time to time by the appellant on behalf of Parle. The terms and conditions also stipulate that the appellant would work as a job worker for manufacture of "Biscuits" for Parle and that Parle would arrange to send the raw materials and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d by Parle on a pro-rata basis proportionate to the turnover of each unit between its own manufacturing plants and its contract manufacturing units, including the appellant, under rule 7 (d) of the CENVAT Rules. 26. What is also important to notice is that rule 7 of the CENVAT Rules allows distribution of credit to its manufacturing units. It does not use the words its own manufactures units. It can, therefore, safely be presumed that the term its manufacturing units should include a contract manufacturer, who manufactures in accordance with the provisions of the Registration Exemption Notification. 27. In this connection it will be pertinent to refer to the decision of the Tribunal in Tamil Trading Corporation. The relevant portion is reproduced below: "6. We have gone through the records of the case carefully. The Customs Notification No. 21/2002-Cus. provides concessional rate of duty for imported Crude Palm Oil for the manufacture of refined oil. Condition 5 of the Notification stipulates that the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. Before ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... certain circumstances. The Commissioner (Appeals) decided in favour of the importer. Revenue came in appeal before the Tribunal. The Tribunal held that the importer was entitled to exemption as neither the Rules nor the Notifications itself prohibited such transfer. The above decision was held in the context of the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. The ratio of the above decision is applicable to the present case also. The fact that Chennai Commissionerate has permitted Registration in respect of the importer who does not own the factory where the imported Crude Palm Oil is utilised is also supporting the appellants' case. Hence we allow the appeal with consequential relief, if any. (emphasis supplied) 28. The Commissioner (Appeals) relied upon the decision of the Tribunal in Sunbell Alloys which was decided on 17.10.2013 and learned Authorized Representative of the Department also placed reliance upon this decision. It needs to be noted that Sunbell Alloys relied upon the decision of the Tribunal in Panacea Biotec that was decided on 21.01.2003. The relevant portion of the decision is reproduced ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....turers are the appellants. Since these are separate legal entities, office of M/s. Merck cannot be considered as an office of the manufacturer and hence Merck cannot be considered as an 'input service distributor' as defined under Rule 2(m) of the CCR, 2004. Further, as per Rule 7, the input service distributor has to distribute the credit to 'its manufacturing units'. The manufacturing units of the appellants are not that of M/s. Merck Specialties Ltd. and these units belong to the appellants and therefore, M/s. Merck cannot distribute Cenvat credit to the appellants under Rule 7 of CCR, 2004 as aforesaid. The expression 'its manufacturing unit' specified under Rule 7 has to be interpreted in terms of the ratio of the decision of the Tribunal in the case of Panasea Biotec Ltd. (cited supra). In that case, for availing the benefit of Notification 23/98-Cus., a condition was prescribed that the importer should utilise the imported bulk drugs in the manufacture of life saving drugs in his factory. A question arose whether 'his factory' would include factory of job-worker and it was held that job-workers' factory will not come within the purview of 'his factory' mentioned in the said ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e imported goods used for the specified purpose, the condition of end use stands complied with. The whole objective of the duty free imported bulk drug is that it should be used in the manufacture of life saving drugs or medicine. In our view, if this condition is fulfilled while the ownership of the goods is with appellant, it can be said condition of the end use is satisfied. This issue has come up in the case of Tamil Trading Corporation Ltd. (supra). (emphasis supplied) 31. It is, therefore, not possible to accept the contention of the Department that principal and the contract manufacturer being separated legal entities, the contract manufacturer, even when operating under the Registration Exemption Notification, cannot be termed as a manufacturing unit of the principal. 32. It also needs to be remembered that CENVAT credit scheme seeks to avoid cascading effect, as would be clear from the press release dated 12.08.2004 issued by the Press Information Bureau, Government of India Ministry of Finance, relating to the draft CENVAT credit rules. The relevant portion is reproduced below: "(iii) In principle, credit of tax on those taxable services woul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sable value of the goods manufactured and sold, there is no reason to deny CENVAT credit of duty and taxes paid on various inputs/input services availed. The relevant portion of the judgment is reproduced below: "7.5 The principle of law that the services which form a part of the assessable value on which excise duty is discharged, would be available as Cenvat credit has also been accepted by the Hon'ble Karnataka High Court in the Case of CCE v. Milipore India P. Ltd. reported on 2012 (26) S.T.R. 514 wherein, it was held that if service tax is paid in respect of any of the service which for a part of the cost of the final product, certainly the assessee would be entitled to Cenvat credit of the tax so paid. In the appellant's own case this Tribunal has in its Order No. A/225/14/EB/C-II, dated 3-3-2014 [2014 (36) S.T.R. 467 (Tribunal)] held that if the cost of various services availed if it forms part of the assessable value of the goods manufactured and sold by the appellant, there was no reason to deny Cenvat credit of the duty/taxes paid on various inputs/input services availed, for undertaking the business operations. The ratio laid down by the Hon'ble Tribunal has bee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....guity in exemption notification which is subjected to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the Revenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export case (supra) stands overruled." 40. The Supreme Court subsequently in Government of Kerala & Another vs. Mother Superior Adoration Convent, Civil Appeal No 202 of 2012 decided on 01.03.2021, drew a distinction between exemption provisions generally and exemption provisions which have a beneficial purpose and the observations are as follows: "23. It may be noticed that the 5-Judge Bench judgment (Dilip Kumar) did not refer to the line of authority which made a distinction between exemption provisions generally and exemption provisions which have a beneficial purpose. We cannot agree with Shri Gupta's contention that sub-silentio the line of judgments qua beneficial exemptions has been done away with by this 5-Judge Bench. It is well settled that a decision is only an authority for what it decides and not what may logically follow from it (se....