2022 (3) TMI 933 - AT - Central Excise

Refund of CENVAT credit - distribution of credit in respect of advertisement services - reversal of credit made under protest - time limitation - unjust enrichment - Rule 7 of the Cenvat Credit Rules, 2004 - HELD THAT - The rule as it existed at the material time has been interpreted by the Bangalore bench in the case of ECOF INDUSTRIES (P.) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, BANGALORE 2009 (10) TMI 171 - CESTAT, BANGALORE where it was held that The restrictions sought to be applied by the Department in this case in limiting the distribution of the Service Tax credit made in respect of the Malur Unit on the ground that the services were used in respect of the Cuttack Unit finds no mention in the relevant rules. As such, restricting the distribution of Service Tax credit in a manner as has been done by the impugned order of the lower appellate authority (original authority had approved of such distribution) cannot be upheld. In case the Department wants to place such restriction as is sought to be placed in the case, the rule is required to be amended. As per this decision, the reason for denial of cenvat credit in terms of the rule as it existed during the material time cannot be sustained. Time Limitation - unjust enrichment - HELD THAT - The grounds raised by the learned AR on issue of limitation and unjust enrichment do not carry forward the case of Revenue as we observed that these grounds were never taken by the original authority - In view of the specific provisions in Section 11B, the refund claim by the appellant could not have been denied on these grounds. It is observed that when the Revenue seeks to deny the credit distributed by the input credit distributor to amongst more than one office unit, then the credit is sought to be denied in a particular unit. For whatever reason the same credit would be admissible to another unit to whom this credit could have been properly distributed even after the amendment made in 2012, i.e. the total credit distributed to all the units remained the same, the only question can be with regard to the correctness of the credit distributed to a particular unit. If credit is sought to be denied at one place, input credit distributor should have been asked to distribute this credit to the other unit. Since this credit is admissible either to unit or its sister concern, there are no merits in the argument advanced by the authorized representative on the unjust enrichment. The claim of learned AR that the debit made under protest and the communication of audit should be treated as an appealable order, cannot be acceded to. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Change of appellant's name due to merger.
2. Rejection of refund claim by the Deputy Commissioner and upheld by the Commissioner (Appeals).
3. Distribution of input service credit by input service distributor.
4. Reversal of input credit and subsequent refund claim.
5. Applicability of Cenvat Credit Rules and relevant case laws.
6. Grounds of limitation and unjust enrichment raised by the Revenue.

Detailed Analysis:

Issue 1: Change of Appellant's Name Due to Merger
The appellant filed a miscellaneous application to change their name from Wyeth Limited to Pfizer Limited following a merger approved by the Hon’ble Bombay High Court on 31.10.2014. The application was allowed, and the name in the cause title of the appeal was amended accordingly.

Issue 2: Rejection of Refund Claim
The appeal was directed against the Order-in-Appeal No. YDB/24/LTU/MUM/2012 dated 28.02.2012, which upheld the Deputy Commissioner’s order rejecting the refund claim. The appellant, a unit of Wyeth Ltd., had distributed input service credits amounting to ?18,89,971/- for advertisement services.

Issue 3: Distribution of Input Service Credit
During an audit, it was observed that the distributed credit pertained to services not related to the goods manufactured by the appellant. Consequently, the appellant was asked to reverse the credit, which they did under protest.

Issue 4: Reversal of Input Credit and Subsequent Refund Claim
The appellant reversed the credit by making a debit entry under protest and later filed a refund claim in 2010, citing the ECOF Industries Pvt. Ltd. case. The refund claim was rejected by the Deputy Commissioner and subsequently by the Commissioner (Appeals), leading to the present appeal.

Issue 5: Applicability of Cenvat Credit Rules and Relevant Case Laws
The appellant argued that during the relevant period, the Cenvat Credit Rules did not require the input service distributor to distribute credit only to the unit related to the service. This condition was introduced in 2012, whereas their case pertained to 2017. The appellant cited the ECOF Industries Pvt. Ltd. case, upheld by the Karnataka High Court, and followed by the Tribunal in Nestle India Ltd., to support their claim.

The Tribunal examined Rule 7 of the Cenvat Credit Rules, 2004, which outlined the conditions for distributing CENVAT credit. The rule was amended in 2012, but for the period in question, only two restrictions existed: the credit should not exceed the service tax paid, and it should not be attributable to services used in a unit exclusively manufacturing exempted goods or providing exempted services.

Issue 6: Grounds of Limitation and Unjust Enrichment Raised by the Revenue
The Revenue argued that the refund claim was time-barred and needed to be examined for unjust enrichment. However, the Tribunal noted that these grounds were not raised by the original authority. Section 11B of the Central Excise Act, 1944, provides that the limitation of one year does not apply if the duty and interest were paid under protest.

The Tribunal also observed that if credit is denied in one unit, it should be redistributed to another unit. As the credit was admissible either to the unit or its sister concern, the argument on unjust enrichment was not valid.

Conclusion:
The Tribunal found no merit in the impugned order and set it aside, allowing the appeal. The order was pronounced in the open court.