2014 (11) TMI 115 - AT - Central Excise

CENVAT Credit - distribution of cenvat credit by ISD - credit related to exempted goods - whether service tax credit will be available to the appellants for availing advertisement services with respect to exempted products - Held that - final products Frooti and Appy are fully exempted products - Advertisement services are availed by the appellants with respect to fully exempted final products Frooti and Appy - The combined reading of the Rule 7 and the clarificatory Circular dated 23-8-2007 clearly shows that there are only two restrictions regarding the distribution of the credit. The first restriction is that the credit should not exceed the amount of Service Tax paid. The second restriction is that the credit should not be attributable to services used in manufacture of exempted goods or providing of exempted services. There are no other restrictions under the rules. The restrictions sought to be applied by the Department in this case in limiting the distribution of the Service Tax credit made in respect of the Malur Unit on the ground that the services were used in respect of the Cuttack Unit finds no mention in the relevant rules. As such, restricting the distribution of Service Tax credit in a manner as has been done by the impugned order of the lower appellate authority (original authority had approved of such distribution) cannot be upheld. In case the Department wants to place such restriction as is sought to be placed in the case, the rule is required to be amended. Procedural irregularities can be ignored while allowing CENVAT Credit but such credit should not be pertaining to inputs/input services used in the manufacture of exempted goods. We are of the considered view that appellants were not entitled to avail CENVAT Credit of Advertisement services availed with respect to exempted finished products Frooti and Appy . Simply including the cost of advertisement expenses in the assessable value of NABB concentrate will not make all the CENVAT Credit admissible if the end products for which services are availed were fully exempted. Following decision of ECOF Industries Pvt. Ltd. Vs CCE Bangalore (2009 (10) TMI 171 - CESTAT, BANGALORE). Invocation of extended period of limitation - Revenue will not come to know from a CENVAT document issued by the ISD appellant whether the credit passed under an ISD document is pertaining to services availed for an exempted final product or not. The same fact was brought to light only on an information followed by detailed investigation. Therefore, extended period will be applicable in the present proceedings - Decided against assessee.

Summary

Issues:
Appeal against demands and penalties for wrongly availed CENVAT Credit on advertisement services for exempted goods.

Analysis:
1. The appeals were filed against the Order-in-Original (OIO) confirming demands and penalties imposed by the Commissioner of Central Excise, Customs & Service Tax Vapi. The main issue was the wrongly taken CENVAT Credit by the appellant for advertisement services availed for exempted goods, leading to penalties on the appellants.

2. The appellant, engaged in the manufacture of non-alcoholic beverages base (NABB), took CENVAT Credit for advertisement services availed by the Headquarters for finished products exempted from Central Excise duty. The Revenue contended that CENVAT Credit for advertisement services on exempted goods cannot be availed. The appellant argued that the advertisement services increased the consumption of their final products, relying on legal precedents like Coca Cola India Pvt. Ltd. vs. CCE Pune-II.

3. The appellant's advocate highlighted the control over the brand name and manufacturing activities, arguing for the admissibility of CENVAT Credit for advertisement services under Rule 2(l) of CENVAT Credit Rules, 2004. The appellant also contested the invocation of the extended period for penalties, citing procedural lapses and lack of clarity from the Revenue.

4. The Revenue defended the orders, stating that the irregular credit was detected based on investigations and argued against the appellant's claims. The Revenue emphasized that the Department was unaware that the ISD documents were for Service Tax paid on exempted final products.

5. The Tribunal analyzed the case records and submissions. It observed that the appellant's reliance on legal precedents was not applicable to the present case, where the final products were fully exempted. Referring to relevant legal provisions and precedents, the Tribunal concluded that CENVAT Credit for advertisement services on exempted goods was not admissible.

6. The Tribunal upheld the invocation of the extended period for penalties, noting the lack of clarification sought by the appellant and the Revenue's discovery through investigations. Penalties were deemed correctly imposed, and the Tribunal dismissed the appeals, affirming the Order-in-Original passed by the adjudicating authority.

This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive overview of the arguments presented and the Tribunal's decision.