2018 (9) TMI 1050 - AT - Central Excise

Input Service Distributor - Distribution of input credit - Rule 7 of CCR - recovery of credit with Interest and penalty - time limitation - Held that - The definition of input service distributor cannot include M/s. MRF Ltd. or its factory premises as per the definition under Rule 2(m) of the CCR, 2004. We also find that the producer or the manufacturer of final product, as correctly contended by the Revenue, is the assessee. It is also not the case that the assessee is a unit or branch of M/s. MRF Ltd. - there are no valid reasons to sustain the findings of the Ld. Commissioner (Appeals). Time Limitation - Held that - After initial objection in 2006, the CERA also did not raise any objection during its audit in 2009 and the Show Cause Notice, having been issued much thereafter, i.e, in the year 2010, there is no justifiable reason to allege suppression of facts - extended period cannot be invoked. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Department's appeal against Commissioner (Appeals) order dated 13.12.2011.
2. Validity of input service credit availed by the assessee from M/s. MRF Ltd.
3. Time bar issue regarding the Show Cause Notice issued by the Department.
4. Merits of the case - eligibility of services for input credit.
5. Interpretation of the definition of 'input service distributor' under CCR.
6. Justifiability of invoking the extended period of limitation.

Analysis:

1. Department's Appeal:
The Department appealed against the Commissioner (Appeals) order dated 13.12.2011. The Commissioner had set aside the Order-in-Original on grounds of limitation and merits. The Department contested this decision.

2. Input Service Credit:
The Department contended that M/s. MRF Ltd. had no authority to distribute Cenvat Credit to the assessee. The Department argued that as per Cenvat Credit Rules, only an office of the manufacturer of final products can distribute input credit. The Department relied on the Hyderabad Tribunal's decision in Ruby Confectionery Pvt. Ltd. case.

3. Time Bar Issue:
Regarding the time bar issue, the Commissioner (Appeals) noted that the Department's Show Cause Notice was barred by limitation. The Commissioner found that the Department had knowledge of the facts and thus could not allege suppression of facts.

4. Merits of the Case:
The Commissioner (Appeals) observed that the disputed services were eligible for input credit based on ISD invoices. The Commissioner emphasized that a technical flaw should not deny substantive benefits to the assessee.

5. Interpretation of 'Input Service Distributor':
The Tribunal analyzed Rule 7 of CCR, which governs the distribution of credit by an input service distributor. It was found that M/s. MRF Ltd. did not fall under the definition of 'input service distributor' as per Rule 2(m) of CCR. The Tribunal affirmed that the assessee, as the manufacturer of final products, was eligible for the credit.

6. Extended Period of Limitation:
The Tribunal upheld the Commissioner (Appeals) findings on invoking the extended period of limitation. Despite the Revenue's arguments on merits, the Tribunal found no infirmity in the lower authority's decision that the proceedings were time-barred. Consequently, the appeal of the Revenue was dismissed.

In conclusion, the Tribunal dismissed the Department's appeal, upholding the Commissioner (Appeals) decision on both the time bar issue and the merits of the case related to input service credit distribution.