2022 (5) TMI 75 - AT - Central Excise

CENVAT Credit - appellant is outsourced manufacturing unit - distribution of input service credit on pro-rata basis proportionate to the turnover of each unit between the manufacturing plants of M/s. PBPL and its contract manufacturing units including M/s. Balaji Edibles i.e. the appellant - violation of Rule 7 of CENVAT Credit Rules 2004 - HELD THAT - From the decision relied upon by the appellant i.e. M/S. KRISHNA FOOD PRODUCTS MS. MARIAMMA R. IYER AND M/S. PARLE BISCUITS PVT LTD. VERSUS THE ADDITIONAL COMMISSIONER OF CGST C. EX 2021 (7) TMI 296 - CESTAT NEW DELHI it is clear that the said issue has already been decided by the larger bench of this Tribunal hence remains no more res integra. Further perusal of the said decision shows that the decision in the case of SUNBELL ALLOYS CO OF INDIA LTD MACHSONS PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS 2014 (2) TMI 297 - CESTAT MUMBAI as have been relied upon by Commissioner while passing the order under challenge have also been discussed and distinguished by the Larger Bench of this Tribunal. It is also perused that the said decision has already been followed in similar facts and circumstances by this Bench n the case of AJMER FOOD PRODUCTS PVT LTD. VERSUS COMMISSIONER OF CGST CENTRAL EXCISE JAIPUR II 2021 (9) TMI 4 - CESTAT NEW DELHI . No distinguished fact is apparent on record in the present appeal nor could have been brought to the notice by the learned DR who rather expressed no objection for following the decision of the Larger Bench. M/s. PBPL was justified in distributing credits on input services attributable to final product on pro rata basis proportionate to the turnover of each unit between the manufacturing plants of M/s. PBPL and its contract manufacturing units including the appellant under Rule 7(d) of the CENVAT Credit Rules - the appellant is held entitled to avail the CENVAT credit where input services is attributed to the goods on which the excise duty is paid and includes the cost of services on which credit was taken. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Alleged wrongful availing of CENVAT Credit by the appellant in violation of Rule 7 of CENVAT Credit Rules 2004.
2. Applicability of notification no. 36/2001-CE dated 26.06.2001 and Board's circular no. 97/8/2007-ST dated 23.8.2007.
3. Amendment in Rule 7 of CENVAT Credit Rules w.e.f. 1.4.2016 and applicability of explanation 4.
4. Justification of distributing credits on input services by M/s. PBPL to its contract manufacturing units including the appellant under Rule 7(d) of the CENVAT Credit Rules.

Analysis:

1. The Department alleged that the appellant wrongly availed CENVAT Credit in violation of Rule 7 of CENVAT Credit Rules 2004 based on ISD invoices issued by M/s. PBPL. The proposal to recover the credit amount was confirmed initially but was later challenged before the Tribunal.

2. The appellant argued that they manufacture biscuits for M/s. PBPL under a specific notification and that M/s. PBPL distributed CENVAT Credit as ISD to its manufacturing units, including the appellant. The appellant cited relevant notifications and circulars to support their claim, emphasizing that there was no violation of Rule 7 of CENVAT Credit Rules.

3. The Department pointed out an amendment in Rule 7 of CENVAT Credit Rules w.e.f. 1.4.2016 and the applicability of explanation 4 introduced through the amendment. The Commissioner (A) supported the applicability of the explanation in dismissing the appeal.

4. The Tribunal observed that the appellant is a contract manufacturing unit for M/s. PBPL and availed CENVAT Credit based on inputs supplied by M/s. PBPL for manufacturing biscuits. The question at hand was whether M/s. PBPL was justified in distributing credits on input services to its contract manufacturing units, including the appellant, proportionate to turnover under Rule 7(d) of CENVAT Credit Rules.

5. Relying on previous decisions, the Tribunal held that M/s. PBPL was justified in distributing credits on input services to contract manufacturing units on a pro rata basis. The Tribunal found no distinguished fact in the present appeal and allowed the appellant to avail CENVAT Credit attributed to goods on which excise duty is paid.

In conclusion, the Tribunal set aside the order under challenge and allowed the appeal, affirming the appellant's entitlement to avail CENVAT Credit as per the distribution by M/s. PBPL under Rule 7(d) of the CENVAT Credit Rules.