2017 (12) TMI 1292 - AT - Central Excise

Distribution of CENVAT credit - whether the appellant company have rightly distributed the Cenvat credit availed by the head office with respect to input services like Banking Services, Business Auxiliary Services, CHA, Courier Services, etc.? - Held that - availment of Cenvat credit in absence of the head office being registered as ISD, there was no illegality in taking the Cenvat credit - as there is only one manufacturing unit, there is no illegality in distributing the credit and/or in availing of credit by the manufacturing unit of the appellant under the facts and circumstances. When there is only one manufacturing unit, the head office exists only for the purpose and support of the manufacturing unit and they are rather one and the same and accordingly all services received at their office are in fact equivalent to services received at the sole manufacturing unit. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Distribution of Cenvat credit by the appellant company with respect to input services like Banking Services, Business Auxiliary Services, CHA, Courier Services, etc.

Analysis:
1. The appeal was filed against the Order-in-Original passed by the Commissioner of Central Excise & Customs, Meerut-II, questioning the distribution of Cenvat credit by the appellant company. The appellant had one manufacturing unit and a corporate office in New Delhi, with sales depots in different locations. The issue revolved around the availing of Cenvat credit based on invoices issued to the corporate office, which were not considered proper documents under the Cenvat Credit Rules, 2004. The show cause notice proposed the recovery of wrongly availed Cenvat credit amounting to ?1,22,27,236 and penalties under relevant provisions.

2. The Central Excise division observed discrepancies in the Cenvat credit availed by the appellant, leading to the issuance of a show cause notice for the period from February 2005 to February 2008. The appellant contested the notice, but the demand for disallowance of Cenvat credit was confirmed along with penalties, except for the Assistant Vice President. Dissatisfied with the Commissioner's order, the appellant approached the Tribunal for redressal.

3. The appellant's counsel argued that the issue of availing Cenvat credit without the registration of the head office as an Input Service Distributor (ISD) was settled through various tribunal and high court judgments. Citing cases like Demosha Chemicals Pvt. Ltd. Vs CCE, it was contended that the absence of ISD registration does not automatically disentitle an entity from availing Cenvat credit. The counsel also referred to the Rajasthan High Court's decision in National Engineering Industries Vs CCE, supporting the distribution of credit without pro rata allocation to different units.

4. After considering the contentions, the Tribunal relied on the precedent set by the Gujarat High Court in Demosha Chemical Pvt. Ltd. case. It concluded that the appellant did not act illegally by availing Cenvat credit without the head office being registered as ISD. Additionally, since there was only one manufacturing unit, the distribution of credit was deemed unnecessary, as the head office and the manufacturing unit were considered one entity. Therefore, the appeal was allowed, setting aside the impugned order and granting consequential benefits to the appellant.

This detailed analysis of the judgment highlights the key issues, arguments presented, relevant legal precedents, and the Tribunal's final decision, providing a comprehensive understanding of the case.