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2024 (2) TMI 768 - AT - Central ExciseDistribution of input service credit by the Principal manufacturer to its Contract Manufacturing Units (Job workers) - permitting distribution of credit by principal manufacturer to its job workers is correct or not - Job worker i.e. Sweety Industries were manufacturing biscuits under the brand names belonging to Principal Manufacturer - duty paid by job worker in Parle Biscuits retail sale price (MRP) less permissible abatement u/S 4A of CEA - Job worker s factory was dedicated for Parle Biscuits and was an extended factory of Parle, manufacturing biscuits under Notification No. 36/2001- CE (NT) dated 26.06.2001 - amendment to Rule 7, CCR was clarificatory in nature or not - conscious or deliberate suppression of facts or mis-statement on the part of the Appellants or not - invocation of Extended period of limitation. HELD THAT - All the issues involved in the present case have been answered by the 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 where it was held that It would not be necessary to answer the issue that whether the appellant would, irrespective of the answer to the first issue, be entitled to avail CENVAT credit when input service is attributed to the goods on which excise duty is paid and includes the cost of services on which credit was taken. From the above judgment, it can be seen that the issue involved in the present case has been settled in favour of the assessee. Accordingly, the impugned order in the present case is also not sustainable. The impugned order is set aside. Appeals are allowed.
Issues Involved:
(a) Distribution of input service credit by the Principal manufacturer to its Contract Manufacturing Units (Job workers) for the period December 2010 to September 2015. (b) Applicability of the judgment of the Larger Bench of Tribunal in Krishna Food Products regarding the distribution of credit prior to 01.04.2016. (c) Invocation of the extended period and penal provisions in the absence of any conscious or deliberate suppression of facts or mis-statement by the Appellants. Summary: Issue (a): Distribution of Input Service Credit: The core issue was whether the distribution of input service credit by the Principal manufacturer to its Contract Manufacturing Units (Job workers) was permissible for the period December 2010 to September 2015, prior to the amendment of Rule 7 of CCR effective from 01.04.2016. The appellant, manufacturing biscuits exclusively for Parle Biscuits Pvt. Ltd under Notification No. 36/2001-CE, claimed that they were treated as deemed principal manufacturers and thus entitled to CENVAT Credit. The Tribunal found that the contract manufacturer steps into the shoes of the principal when operating under the Registration Exemption Notification, and Rule 7 of CENVAT Rules allows distribution of credit to "its manufacturing units," which includes contract manufacturers. Issue (b): Applicability of Krishna Food Products Judgment: The Tribunal referred to the Larger Bench decision in Krishna Food Products, which held that the distribution of credit was permissible for the period prior to 01.04.2016 as the amendment to Rule 7 was clarificatory in nature and thus applicable retrospectively. The Tribunal concluded that the appellant was justified in distributing credits on input services attributable to the final product on a pro-rata basis proportionate to the turnover of each unit, including contract manufacturing units, under Rule 7(d) of the CENVAT Rules. Issue (c): Invocation of Extended Period and Penal Provisions: The Tribunal noted that there was no conscious or deliberate suppression of facts or mis-statement by the Appellants. Similar disputes with various CMUs of Parle had been resolved in their favor either on limitation by various Benches or on merits by the Larger Bench of the Tribunal. Consequently, the extended period and penal provisions were not invokable. Conclusion: The Tribunal set aside the impugned order, allowing the appeals in favor of the appellant, and concluded that the issue involved had been settled in favor of the assessee based on the judgment in Krishna Food Products. The matter was pronounced in the open court on 14.02.2024.
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