2015 (9) TMI 1576 - AT - Central Excise

CENVAT credit - transfer of credit - input service distribution - credit distributed by the Appellant from its Wagholi Unit to their Kanhe Unit have been found to be lacking nexus and/or improperly distributed - Held that - the Commissioner (Appeals) is in error in his observation that there is lack of nexus in the Cenvat Credit taken, which is not made out in the SCN - Even otherwise, the credit was rightly taken in the Waghoii Unit - as none of the restrictions under Rule 7 is attracted, the appellant is entitled to transfer the credit from their Wagholi Unit to their Kanhe Unit - appeal allowed - decided in favor of appellant.

Summary

Issues involved: Appeal against Order-in-Appeal regarding Cenvat Credit distribution lacking nexus and improper distribution.

Detailed Analysis:

1. Background and Allegations:
The appellant, Mahindra & Mahindra Ltd., appealed against an Order-in-Appeal dated 08.4.2010, which found the Cenvat Credit distributed from the Wagholi Unit to the Kanhe Unit lacking nexus and improperly distributed. The dispute arose from a show cause notice alleging that the input service credit for services rendered to the Wagholi unit was wrongly transferred to the Kanhe unit.

2. Contentions and Adjudication:
The appellant contested the show cause notice, citing relevant rules and circulars to support their position. However, the proposed demand was confirmed, disallowing the credit transfer to the Kanhe unit and imposing penalties under the Central Excise Act. The Commissioner (Appeals) upheld this decision, emphasizing the requirement of services being used "in or in relation to manufacture and clearance of the final product."

3. Appeal to the Tribunal:
The appellant appealed to the Tribunal, arguing that the credit transfer was allowable under Rule 7 of CCR 2004. They highlighted the conditions for credit distribution and contended that the credit transfer was permissible as both units were manufacturing units with dutiable outputs. The Revenue relied on a High Court ruling but failed to establish a lack of nexus in the credit transfer.

4. Tribunal's Decision:
After considering the arguments, the Tribunal found in favor of the appellant. It held that the credit transfer from the Wagholi Unit to the Kanhe Unit was permissible as none of the restrictions under Rule 7 were applicable. The Tribunal disagreed with the Commissioner's observation of a lack of nexus and set aside the impugned order. The appellant was granted consequential benefits, and the pre-deposit amount was to be refunded with interest within 45 days.

In conclusion, the Tribunal allowed the appeal, emphasizing the permissibility of the credit transfer under the relevant rules and dismissing the Revenue's arguments against it.