2024 (11) TMI 201 - AT - Central Excise

Reversal of excess input service credit - Distribution of input service credit of the common input credit of various input services distributed by their Head Office situated at Thane (Mumbai) - Department is of view that since the appellants Head Office is who providing output service, the Head Office of the appellant has not proportioned input credit going for providing output service at cleared and therefore distribute the input service credit amounts three units in excess - HELD THAT - The fact is noted that the show cause notice on the similar issue were also issued to the appellant is other units situated at Tamil Nadu and Uttar Pradesh. The matter have already been decided by the Division Bench of this Tribunal in M/S COVESTRO (INDIA) PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE 2024 (3) TMI 1367 - CESTAT ALLAHABAD wherein, the appeal of the appellant has been allowed by this Tribunal. The matter is no longer res Integra as the issue has already been decided by this Tribunal in the appellant s own case on the same issue where it was held that 'It is found that exactly the same issue in case of Appellant s Tiruchirapalli unit has been decided by the Chennai Bench vide Final Order 2023 (2) TMI 7 - CESTAT CHENNAI , observing that 'There is also nothing brought out on record if the appellant, being a recipient unit, had any role or influence in the manner of distribution so that a case of wilful suppression with an intention to evade payment of duty, etc., could be justified. When the appellant took consistent stand inter alia that its Head office-ISD unit was regularly filing its ER-1 return, that the service provider unit at Head Office had Service Tax liability every year, which was paid in cash and that the entire tax liability was paid in cash every year rather than paying through the CENVAT Credit, the lower authorities have not denied anywhere the above facts.'' Following the above decision of this Tribunal in the appellants own case on the same issue it is decided that impugned order in appeal is devoid of any merit and therefore, the same is set aside - appeal allowed.

Summary

Issues:
1. Distribution of input service credit by Head Office to various units.
2. Demand for reversal of excess input service credit.
3. Application of Rule 14 of Cenvat Credit Rules, 2004.
4. Commissioner (Appeals) decision confirmation of reversal of Cenvat Credit.
5. Previous Tribunal decisions on similar issues.
6. Applicability of Rule 3 and 7 of the CCR, 2004.
7. Impact of wilful suppression on tax liability.
8. Time-bar for serving Show Cause Notice.
9. Revenue loss justification for disallowance of CENVAT Credit.
10. Decision on the appeal and setting aside the impugned order.

Analysis:
The case involves the distribution of input service credit by the Head Office of the appellant to its units in Gujarat, Tamil Nadu, and Uttar Pradesh. The Department alleged that the Head Office did not proportion input credit correctly, resulting in excess credit distribution to the units. A show cause notice was issued demanding reversal of excess credit, invoking Rule 14 of Cenvat Credit Rules, 2004, and Section 111A(4) of the Central Excise Act, 1994. The Commissioner (Appeals) upheld the reversal of Cenvat Credit, leading to the appeal.

The Tribunal noted that similar issues were raised in the appellant's other units in Tamil Nadu and Uttar Pradesh. A previous Tribunal decision in the appellant's favor was cited, indicating that the matter had been previously decided. The Tribunal analyzed the application of Rule 3 and 7 of the CCR, 2004, emphasizing the need for evidence of wilful suppression to justify disallowance of credit. The Tribunal referenced previous judgments supporting the recipient's position and the time-bar for serving Show Cause Notices.

The Tribunal highlighted that the Department failed to prove revenue loss or suppression by the appellant, leading to the conclusion that the disallowance of CENVAT Credit was incorrect and unsustainable. Citing relevant case law and previous Tribunal decisions, the Tribunal set aside the impugned order and allowed the appeal. The judgment emphasized the importance of evidence and justification for disallowing credit, ultimately ruling in favor of the appellant based on legal principles and precedents.