2024 (11) TMI 875 - AT - Central Excise

Reversal of CENVAT Credit - packing material which is used for dutiable as well as non-dutiable products - invoice does not bear invoice number - HELD THAT - In this case main denial of the Cenvat credit of Rs.10,03,635/- on the basis of ISD invoices issued to the appellant for promotional and marketing expenses alleging that the said promotional and marketing expenses are not wholly for the product manufactured by the appellant. The said issue has been examined by the Larger Bench of this Tribunal and the penalty in the case of M/s. Krishna Food Products 2021 (5) TMI 906 - CESTAT NEW DELHI wherein this Tribunal observed ' A narrow and a literal interpretation of the phase its manufacturing units should, therefore, be avoided, more particularly when the Registration Exemption Notification provides for authorisation for manufacture of goods on behalf of the principal manufacturer. There appears to be no good reason as to why CENVAT credits should not be allowed to be distributed to a job worker in the facts and circumstances of the present case.' The appellant is entitled to take Cenvat credit of Rs.10,03,635/-. Therefore, the said Cenvat credit is allowed. Availment of Cenvat credit - HELD THAT - The appellant has produced the invoice bearing invoice number and the learned Authorized Representative also admitted that invoice number mentioned in the invoice, therefore, the said Cenvat credit is correctly taken by the appellant. Accordingly, Cenvat credit of Rs.32,149/- is allowed to the appellant. Cenvat credit on packing material - HELD THAT - The reversal of proportionate Cenvat credit is sufficient for the appellant to avail Cenvat credit of Rs.39,159/-. If there is any discrepancy in the availment of Cenvat credit, the adjudicating authority shall verify from the records and if some calculation error is there, the appellant shall reverse the said proportionate Cenvat credit. In view of this, it is held that the appellant is entitled to take Cenvat of Rs.39,159/- also if there is no calculation error found by the adjudicating authority. No penalty is imposable on the appellant. The appeal is disposed of.

Summary

Issues:
- Denial of Cenvat credit on packing material used for dutiable and non-dutiable products.
- Denial of Cenvat credit due to missing invoice number.
- Denial of Cenvat credit distributed by the Input Service Distributor (ISD) for marketing and promotional expenses.

Analysis:

1. The appellant appealed against the denial of Cenvat credit amounting to Rs. 10,81,225 for the period April 2017 to June 2017. The denial was based on various grounds, including the use of packing material for both dutiable and non-dutiable products and missing invoice numbers on certain invoices.

2. The denial of Cenvat credit amounting to Rs. 10,03,635 was contested by the appellant, arguing that the credit distributed by the ISD for marketing and promotional expenses should not be denied. The appellant provided evidence to support their claim, including a calculation sheet and references to relevant case law.

3. The appellant's counsel submitted that the denial of Cenvat credit on packing material was addressed by the appellant through reverse proportionate credit for exempted final products. For other discrepancies in Cenvat credit availed, the appellant admitted errors and rectified them. The appellant argued that they should be entitled to the Cenvat credit.

4. The Authorized Representative for the respondent supported the impugned order, emphasizing the conditions under Rule 7 of the Cenvat Credit Rules, 2004, regarding the distribution of Cenvat credit by the ISD. The representative contended that the promotional and marketing expenses were not wholly for products manufactured by the appellant.

5. After hearing both sides and considering their submissions, the Tribunal examined the main issue of denial of Cenvat credit of Rs. 10,03,635 related to ISD invoices for marketing and promotional expenses. The Tribunal referred to a previous judgment and held that the appellant was entitled to the Cenvat credit based on the principle of avoiding cascading effects and capturing all costs.

6. The Tribunal also addressed the denial of Cenvat credit on packing material and other discrepancies, ultimately allowing the appellant to avail the Cenvat credit of Rs. 10,03,635 and other amounts after verifying any potential calculation errors. No penalty was imposed on the appellant in the circumstances of the case.

7. The appeal was disposed of in favor of the appellant, granting them the Cenvat credit and addressing the issues raised in the appeal.

This detailed analysis covers the key issues raised in the judgment, the arguments presented by both parties, and the Tribunal's decision on each issue.