2019 (7) TMI 1175 - HC - Central Excise

Maintainability of appeal - Section 35-G of the Central Excise Act, 1944 - whether the credit availed of, by the assessee/respondent in the facts of the present case was authorized by law or the rules, especially Rule 2(l) of the Cenvat Credit Rules, 2004? HELD THAT - According to the agreement of the parties, the assessee manufactured articles which were ultimately cleared by its principal i.e. M/s. Parle Products Pvt. Ltd. There is no dispute that Central Excise levy was borne by Parle. The assessee was merely authorized to manufacture the goods. So far as provisions of Service tax is concerned, this Court notices that there were two components. One, job work itself i.e. manufacture of confectionery and biscuits, which was the provision of service, i.e. the main service to M/s. Parle Products Pvt. Ltd. and secondly, the transportation services. It is the second component which is in issue in the present case. There is nothing either on record or in the show cause notice or even in the Order in Original which suggests that the agreement, which parties entered into whereby service tax was to be borne by the assessee and input credit was to be claimed by it, was prohibited in law - Furthermore, it is not revenue s case that M/s. Parle Products Pvt. Ltd. availed of, such Cenvat credit as a matter of fact. This Court is of the opinion that no question of law arises - appeal dismissed - decided against Revenue.

Summary

Issues:
Unauthorized availment of Cenvat credit by the assessee for providing input services to another entity, interpretation of Rule 2(l) of the Cenvat Credit Rules, 2004, applicability of revenue neutrality principle in allowing the assessee's appeal.

Analysis:
The primary issue in this case revolved around the unauthorized availment of Cenvat credit by the assessee for providing input services to M/s Parle Products Ltd. The Revenue contended that the credit availed by the assessee was not authorized by law or rules, specifically Rule 2(l) of the Cenvat Credit Rules, 2004. The dispute arose from the contractual services and job work provided by the assessee to M/s Parle Products Ltd., where the assessee manufactured goods on behalf of Parle Products Ltd. and also transported the finished products to their premises. The agreement between the parties allowed the assessee to avail Cenvat credit of Central Excise duty paid on raw materials and other items, which was challenged by the Revenue through a show cause notice.

The Court examined the nature of the agreement between the parties and the provisions of the Cenvat Credit Rules. It was observed that the assessee was authorized to manufacture goods on behalf of Parle Products Ltd., who bore the Central Excise levy. The Court noted that the agreement allowed the assessee to claim input credit and bear the service tax, with no prohibition in law against such an arrangement. Additionally, there was no evidence that Parle Products Ltd. availed of the Cenvat credit in question. The Court referenced previous rulings, such as M.P. Biscuits Pvt. Ltd. and Commissioner of Central Excise, Indore vs. M/s. MB Bakers Pvt. Ltd., where job workers were permitted to claim Cenvat credit, supporting the decision of the CESTAT in favor of the assessee.

Furthermore, the issue of revenue neutrality was raised, with the appellant arguing that the principle should not solely rely on allegations of no tax effect. The Court referred to the Jay Yuhshin Ltd. case, emphasizing that revenue neutrality is a fact-dependent issue and mere allegations are insufficient to disallow credit. Ultimately, the Court found no legal question to be addressed, leading to the dismissal of the appeal and the disposal of all related applications.

In conclusion, the judgment upheld the decision of the CESTAT, affirming the assessee's right to claim Cenvat credit for the services provided to M/s Parle Products Ltd. The Court emphasized the legality of the agreement between the parties and the absence of any prohibition against the assessee claiming input credit, thereby dismissing the appeal based on the lack of a legal question and citing precedents supporting the assessee's position.