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2019 (4) TMI 1843 - AT - Central ExciseCENVAT Credit - ISD - proportionate distribution of credit - appellant has availed Cenvat credit on the strength of invoices issued by head office as an Input Service Distributor (ISD) in terms of Rule 7 of Cenvat Credit Rules, 2004 - HELD THAT - A similar dispute has been decided in its favour through Final Order No. 50405/2019, dated 28-2-2019 passed in the appellant s own case, M/S HINDUSTAN ZINC LIMITED VERSUS COMMISSIONER, CENTRAL EXCISE 2019 (4) TMI 475 - CESTAT NEW DELHI by following the ratio of the Hon ble Bombay High Court s decision in THE COMMISSIONER, CENTRAL TAX, PUNE-I COMMISSIONERATE VERSUS M/S. OERLIKON BALZERS COATING INDIA P. LTD. 2018 (12) TMI 1300 - BOMBAY HIGH COURT where it was held that proportionate distribution of credit was not mandatory prior to amendment (w.e.f. 1-4-2016) in Rule 7 of Cenvat Credit Rules, 2004. The Deputy Director, CRA-II has communicated to the jurisdictional Commissioner through its letter dated 8-5-2018 that the audit para has been dropped. When the audit memo itself has been dropped, the present proceeding which has been originated from the said audit memo has become non est. Appeal allowed - decided in favor of appellant.
Issues:
1. Proper distribution of Cenvat credit by the appellant as an Input Service Distributor (ISD). 2. Allegation of excess credit distribution leading to demand recovery, interest, and penalty imposition. 3. Appellant's contention of correct credit distribution, revenue neutrality, and limitation on demand. 4. Departmental representative's defense of impugned order findings. 5. Tribunal's evaluation of submissions and records. 6. Applicability of previous Tribunal and High Court decisions on similar disputes. 7. Sustainability of the impugned order dated 1-11-2017. 8. Status of the audit para and its impact on the proceedings. Analysis: 1. The appellant, a manufacturer of various products, availed Cenvat credit during the financial year 2013-14 based on invoices issued by the head office as an ISD. The show cause notice alleged improper pro rata credit distribution, resulting in excess credit to the appellant unit, leading to demand recovery, interest, and penalty imposition. 2. The appellant contended that the credit distribution was correct, emphasizing revenue neutrality and citing a Tribunal decision in its favor. It argued that the demand was time-barred and lacked mala fide intent, thus penalty imposition was unjustified. The Departmental Representative supported the findings of the impugned order. 3. The Tribunal considered both parties' submissions and records, noting a previous decision in the appellant's favor based on a Bombay High Court ruling. The Tribunal found merit in the appellant's argument, referencing the revenue neutrality aspect and the subsequent amendment to Rule 7 of the Cenvat Credit Rules. 4. The Tribunal highlighted the previous order's relevance, where it was held that the appellant did not violate any rule by distributing more credit to a specific unit before the rule amendment. Moreover, the Tribunal noted that the audit para, the basis of the show cause notice, had been dropped, rendering the proceedings non est. 5. Consequently, the Tribunal concluded that the impugned order dated 1-11-2017 was not sustainable. The Tribunal also considered the dropped audit para's impact on the proceedings, ultimately allowing the appeal with any consequential relief as per the law. This detailed analysis covers the issues involved in the legal judgment comprehensively, outlining the arguments, Tribunal's evaluation, and the final decision's rationale.
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