2016 (12) TMI 982 - AT - Central Excise

Denial of CENVAT credit - denial on the ground that service not related to product - Held that - I find that the fact is not under dispute that though input service on which the credit was disputed was not used in the factory of the appellant but it is related to the product Nescafe and Maggie Noodles which are manufactured in the appellant company s different factory. As regard the provision for distribution of the credit, there is no condition of one to one correlation between the credit distributed and the quantum of service received and used by a particular factory. Though the service is related to the product which is manufactured in the appellants company in other factories. But all the factories belonging to one company and in the absence of any provision of one to one correlation the credit can be distributed to any factory of one company - reliance placed on the decision of the case of Commissioner of C.Ex., Bangalore-I Vs. Ecof Industries Pvt. Ltd. 2011 (2) TMI 1130 - KARNATAKA HIGH COURT , where it was held that Merely because the input service tax is paid at a particular unit and the benefit is sought to be availed at another unit, the same is not prohibited under law Even though the service is not used in the appellant factory, but received and used in different factory of the same company, credit cannot be denied - appeal allowed - credit allowed - decided in favor of assessee.

Summary

Issues involved: Availment of Cenvat credit for services distributed by Head Office related to products manufactured in different factories.

Analysis:
1. The appellant availed Cenvat credit for services distributed by their Head Office related to products manufactured in different factories. The department disputed the credit, arguing that the services were not related to the products manufactured in the appellant's factory. The adjudicating authority and Commissioner (Appeals) upheld the demand for Cenvat credit, leading to the appeal.

2. The appellant's counsel argued that the services, though not directly related to the factory, were linked to products manufactured in a different factory of the same company. The counsel cited precedents and highlighted that there is no requirement for a one-to-one correlation under the Cenvat Credit Rules. The counsel relied on judgments such as Commissioner of C.Ex., Bangalore-I Vs. Ecof Industries Pvt. Ltd. to support their argument.

3. On the contrary, the Revenue's representative reiterated that as per the Cenvat Credit Rules, credit can only be availed for input services used in the same factory for manufacturing the final product. Since the services were related to products manufactured in different factories, there was a violation of Rule 2(l)(ii) of the Cenvat Credit Rules. The Revenue's argument was supported by judgments like Nitco Limited Vs. Commissioner of C.Ex., Raigad.

4. The tribunal considered both sides' submissions and noted that the disputed input services were related to products manufactured in the appellant company's different factory. The tribunal emphasized that there was no requirement for a one-to-one correlation between the credit distribution and the quantum of service used by a particular factory. Citing the judgment in Ecof Industries Pvt. Ltd., the tribunal held that the appellant was entitled to distribute the Cenvat credit on input services to any factory of the same company, even if not directly used in the appellant's factory.

5. Ultimately, the tribunal ruled in favor of the appellant, stating that even if the service was not used in the appellant's factory but in a different factory of the same company, the credit could not be denied. The tribunal set aside the impugned order, allowing the appeal and confirming the appellant's entitlement to Cenvat Credit based on the legal provisions and precedents cited during the proceedings.