2018 (9) TMI 1653 - AT - Central Excise

CENVAT Credit - credit availed on the basis of the invoices issued by their corporate office at Kolkata and their sales branch Mumbai in the capacity as Input Service Distributor - reversal order on the ground that the appellant has not distributed the credit proportionately to all the units. Held that - The said issue is decided in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS DASHION LTD 2016 (2) TMI 183 - GUJARAT HIGH COURT , where it was held that There is nothing in the said Rules of 2005 or in the Rules of 2004 which would automatically and without any additional reasons dis-entitle an input service distributor from availing Cenvat credit unless and until such registration was applied and granted. Demand do not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of CENVAT credit by distributing it to various units without proportionate turnover allocation.

Analysis:
The case involved the appellants, manufacturers of dry cell batteries, availing CENVAT credit of duty paid on inputs, capital goods, and input services for their multiple manufacturing units. The issue arose when the department observed that the credit distribution to units based on invoices from the corporate office and sales branch was not proportionate, contrary to Rule 7 of CENVAT Credit Rules, 2004. A show cause notice was issued for disallowance of credit, recovery with interest, and penalties, which was confirmed by the adjudicating authority, leading to the appeal.

The main contention put forth by the appellant was the eligibility to avail CENVAT credit distributed to units despite the disproportionate allocation based on turnover. The appellant cited precedents like Commissioner of Central Excise Vs. Dashion Ltd. and Commissioner of Central Excise Vs. Ecof Industries Ltd., supporting their stance. The department, represented by the ld. AR, supported the findings of the impugned order.

Upon hearing both sides, the tribunal referred to the decision of the Hon’ble High Court of Gujarat in the case of Dashion Ltd., which was accepted by the department through a circular. Additionally, the tribunal cited its own precedent in the case of Wabco India Ltd. Vs. Commissioner of Central Excise, where a similar demand was set aside following the decision in Dashion Ltd. The tribunal concluded that the demand could not be sustained based on the established legal position and set aside the impugned order, allowing the appeal with any consequential relief.

In summary, the tribunal ruled in favor of the appellant, holding that the demand for disallowance of CENVAT credit due to disproportionate distribution among units was not valid, aligning with legal precedents and departmental circulars. The decision emphasized adherence to Rule 7 of the CENVAT Credit Rules and established case law, ultimately granting relief to the appellant.