2021 (9) TMI 4 - AT - Central Excise

Validity of issuance of Input Service Distributors invoice by Parle to its contract manufacturing unit - the contract manufacturing is carried out in terms of N/N. 36/2011-CE (NT) dated 26.6.2011 - HELD THAT - The Hon ble Larger Bench in the case of M/S. KRISHNA FOOD PRODUCTS, M/S. MARIAMMA R. IYER, M/S. PARLE BISCUITS PVT LTD. VERSUS THE ADDITIONAL COMMISSIONER OF CGST C. EX 2021 (5) TMI 906 - CESTAT NEW DELHI has decided the said question in conformity in favour of the assessee by holding that the Parle Biscuit Products Ltd. was justified in distributing the credit on input services attributable to excisable products on pro rata basis proportionate to the turn over of each unit between the manufacturing plant of Parle Biscuits and its other manufacturing units. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Alleged contravention of Rule 7 and 9 of Cenvat Credit Rules, 2004 by the appellant.
2. Entitlement to avail Cenvat Credit by the appellant as a contract manufacturing unit.
3. Legal correctness of Input Service Distributors' invoice issuance by the principal manufacturer to the contract manufacturing unit.

Analysis:
1. The appellant, registered for biscuit manufacturing, faced allegations of contravening Rule 7 and 9 of Cenvat Credit Rules, 2004 by availing and utilizing Cenvat credit amounting to ?4,74,873. The Department contended that the appellant, acting as a contract manufacturing unit for Parle Biscuits Pvt. Ltd., was not entitled to the credit under notification No. 36/2011 CE(NT) dated 26.6.2011. A show cause notice was issued, leading to the confirmation of the proposal initially, which was later rejected in the Order-in-Appeal.

2. The appellant challenged the Order-in-Appeal before the Tribunal, arguing that a similar issue had been decided in favor of the assessee in a Larger Bench decision involving M/s. Krishna Food Products. The Tribunal acknowledged the similarity of facts with the previous decision and allowed the appeal in favor of the appellant based on the precedent set by the Larger Bench.

3. The key issue in the present appeal was whether the issuance of Input Service Distributors' invoice by Parle to its contract manufacturing unit was legal under notification No. 36/2011-CE (NT) dated 26.6.2011. The Larger Bench had previously ruled in favor of the assessee, stating that Parle was justified in distributing credits on input services to the contract manufacturing units on a pro-rata basis proportionate to the turnover of each unit between the manufacturing plants. In light of this decision and the identical nature of facts in the present case, the Tribunal set aside the order under challenge and allowed the appeal.

This detailed analysis of the legal judgment highlights the issues involved, the arguments presented, and the ultimate decision rendered by the Tribunal, providing a comprehensive understanding of the case.