2024 (4) TMI 961 - AT - Central Excise

CENVAT Credit - Input service distribution - credit distributed by M/s. Parle Biscuit Private Ltd. i.e. inputs service distributor to the appellant a contractual manufacturer/job worker for the period prior to 01.04.2016 is in accordance with Rule 7 of CENVAT Credit Rules 2004 as prevailing at the relevant time or not - HELD THAT - Prior to 01.04.2016 also Rule 7 allows distribution of credit to its manufacturing units. Here the words used are its manufacturing units which in absence of anything contrary cannot be said to be limited to manufacturing unit owned by Parle Biscuits only. The first principle of interpretation is that the words used in any statute have to be interpreted without adding any words. The term its manufacturing unit has certainly a wider term to include an outside manufacturing unit or the job worker. Another thing which supports my aforesaid view is the Registration Exemption Notification issued in the year 2001 under Rule 9(2) of Central Excise Rules 2001 which provides for exemption from registration of the authorised person to manufacture goods on behalf of principal manufacturer - As per the agreement between appellant and Parle Biscuits they were receiving the raw materials from them and finished goods were processed at their factory with their won labour but Trademarks of Parle Biscuits were cleared on payment of duty to the depot of Parle Biscuits. Number of decisions have been placed on record by the learned Counsel in support of her submission that even prior to 01.04.2016 Rule 7 ibid permitted distribution of credit by the Input Service Distributor even to contract manufacturer or the job worker. I have gone through all the decisions. In my view the issue involved herein is no more res integra in view of those decisions and in particular the reference answered by the Larger Bench of the Tribunal on the very same issue in the matter of the 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 in which it has been held even in terms of the provisions of rule 2(m) and rule 7 of the CENVAT Rules as they stood prior to 01.04.2016 the appellant could distribute CENVAT credit in respect of the service tax paid on inputs services to its manufacturing units including a job workers. M/s Parle Biscuits Pvt Ltd. i.e. the input service distributor has rightly distributed the Credit to the appellant and the appellant is justified in availing the same - the impugned order is set aside - appeal allowed.

Summary

Issues involved:
The appeal challenges the Commissioner's rejection of the appellant's appeal regarding the distribution of ISD credit prior to 31.03.2016 by an "inputs service distributor" to its own units providing taxable service or manufacturing goods.

Details of the judgment:
The appellant, a contractual manufacturer/job worker, received credit from the "inputs service distributor," M/s. Parle Biscuit Private Ltd., for the period before 01.04.2016. The appellant utilized this credit for duty payments on biscuits manufactured for Parle Biscuits. The department issued a show cause notice questioning the admissibility of the credit distributed to the appellant. The Adjudicating authority confirmed the demand, and the Commissioner (Appeals) upheld this decision.

Interpretation of Rule 7:
The Tribunal analyzed Rule 7 of the CENVAT Credit Rules, 2004 before and after 01.04.2016. The rule allows the distribution of credit by an input service distributor to its manufacturing units. The term "its manufacturing units" was interpreted to include outside manufacturing units or job workers. The Tribunal referred to the Registration Exemption Notification of 2001, supporting the distribution of credit to job workers. Previous decisions and a Larger Bench ruling affirmed the distribution of credit to job workers even before 01.04.2016.

Precedents and Rulings:
Several decisions by the Tribunal supported the distribution of credit to job workers before 01.04.2016. The Tribunal emphasized the beneficial nature of the CENVAT scheme to avoid cascading effects of taxes. The Larger Bench's decision and subsequent rulings upheld the distribution of credit to job workers. The Tribunal noted that earlier decisions contrary to this view were rendered before the Larger Bench's ruling.

Conclusion:
Based on the interpretations of Rule 7 and the precedents cited, the Tribunal concluded that M/s. Parle Biscuits Pvt Ltd. rightfully distributed credit to the appellant. The impugned order was set aside, and the appeal by the appellant was allowed.

Final Decision:
The Tribunal pronounced the judgment on 24.04.2024, allowing the appeal and overturning the decision of the Commissioner (Appeals) regarding the distribution of ISD credit by M/s. Parle Biscuits Pvt Ltd. to the appellant.