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2016 (9) TMI 781 - AT - Central ExciseCenvat credit - invoices issued by M/s PPPL as Input Service Distributor (ISD) - appellants are engaged in manufacture of PARLE brand sugar boiled confectionary and were clearing their entire production to M/s PPPL - Held that - the Rule 7 of CCR, 2004 clearly states that the input service distributor may distribute the CENVAT Credit in respect of service tax paid on the input service to its manufacturing units or units providing output service. The question is whether the appellant can be considered as a manufacturing unit of M/s PPPL. The crux of the first submission put forward by appellant is that the appellant would fall under the category of manufacturing unit of M/s PPPL as provided in Rule 7, CCR, 2004. It is the case of the appellant that as the appellant is manufacturing on behalf of M/s PPPL and under the scheme provided in notification no. 36/2001-CE (NT) dated 26.06.2001 the appellant has to be considered as manufacturing unit of M/s PPPL. However, this issue stands settled against the appellant in the case of Sunbell Alloys Com of India Ltd, Machsons Pvt Ltd., Vs CCE & C, Belapur 2014 (2) TMI 297 - CESTAT MUMBAI . By following the same, I am able to conclude that appellant cannot be considered as a manufacturing unit of input service distributor, M/s PPPL, for the purpose of availing CENVAT Credit on input invoices issued by M/s PPPL. The second contention raised by the appellant is that the amendment brought forth to Rule 7 with effect from 01.04.2016 being a substitution has to be applied retrospectively. At the outset, it has to be stated that there is nothing in the amendment which says that the amendment is to apply retrospectively. The amendment does not appear to be clarificatory or for correcting any obvious mistake or for removing any discrimination between same class. Therefore, the judgments cited by the learned counsel for appellant in my view does not assist the appellant. As already stated since the amendment brought forth with effect from 01.04.2016 does not state that it is to apply retrospectively, I am able to conclude without any hesitation that the amendment is to apply prospectively only. From the foregoing I hold that the appellants are not eligible to avail CENVAT Credit on the input invoices distributed by ISD, M/s PPPL. Invokation of extended period of limitation - Imposition of penalty - appellant contended that the SCN dated 21.02.2012 for the period August, 2005 to June, 2011 is time barred. So also in Appeal No. 27022/2013, some part in the period involved (July 2001 to May 2012) would fall beyond the normal period - Held that - it is seen from the document/authorization filed by the appellant before the Jurisdictional Superintendent that the appellant had disclosed their intention to avail CENVAT Credit of central excise duty and service tax distributed by M/s PPPL. Further, it is seen that the relied upon documents for issue of the SCNs are nothing but the ER-1 returns, the letters issued by appellant to the department and authorization letter dated 15.09.2001. In such circumstances it cannot be said that the appellant has suppressed facts with intention to evade payment of duty. The department has failed to establish that there is willfull suppression with intent to evade payment of duty. Moreover, the issue has seen agitated before the Tribunal in many cases and therefore is an interpretational one. On such score I am of the view that the extended period is not invokable and that there is no ground for imposing penalty. - Decided partly in favour of appellant
Issues Involved:
1. Eligibility of the appellant to avail CENVAT Credit on input service distributed by M/s PPPL as an Input Service Distributor (ISD). 2. Retrospective applicability of the amendment to Rule 7 of CENVAT Credit Rules, 2004. 3. Invocation of the extended period of limitation and imposition of penalties. Detailed Analysis: 1. Eligibility to Avail CENVAT Credit: The primary issue is whether the appellant, a contract manufacturing unit (CMU) for M/s PPPL, can avail CENVAT Credit on input service invoices issued by M/s PPPL. The department contended that the appellant, being an independent entity, cannot avail such credit. According to Rule 7 of the CENVAT Credit Rules, 2004, the input service distributor may distribute the credit to its manufacturing units. The appellant argued that they should be considered a manufacturing unit of M/s PPPL, as they manufacture products exclusively for M/s PPPL using materials supplied by them. However, the Tribunal referred to the case of Sunbell Alloys Com of India Ltd., where it was held that a job worker or contract manufacturer cannot be considered a manufacturing unit of the principal manufacturer for the purpose of availing CENVAT Credit. Consequently, the Tribunal concluded that the appellant cannot be considered a manufacturing unit of M/s PPPL and thus is not eligible to avail the CENVAT Credit on input service invoices issued by M/s PPPL. 2. Retrospective Applicability of Rule 7 Amendment: The appellant argued that the amendment to Rule 7 of the CENVAT Credit Rules, 2004, effective from 01.04.2016, should be applied retrospectively as it was a "substitution" meant to correct a lacuna in the previous rule. The Tribunal noted that there was no indication in the amendment itself that it was intended to apply retrospectively. The judgments cited by the appellant were found inapplicable as they pertained to clarificatory amendments or those correcting obvious mistakes, which was not the case here. Therefore, the Tribunal held that the amendment to Rule 7 is prospective and does not apply to the period in question. 3. Invocation of Extended Period of Limitation and Penalties: The appellant contended that the show cause notice (SCN) dated 21.02.2012 for the period August 2005 to June 2011 was time-barred and that there was no suppression of facts. The Tribunal observed that the appellant had disclosed their intention to avail CENVAT Credit in documents filed with the department, and the relied-upon documents for issuing the SCNs were ER-1 returns and authorization letters. Since the department was aware of the appellant's actions and the issue involved an interpretation of the rules, the Tribunal concluded that there was no willful suppression with intent to evade duty. Consequently, the extended period of limitation was not invokable, and the penalties imposed were set aside. Conclusion: The Tribunal held that the appellant is not eligible to avail CENVAT Credit on input service invoices issued by M/s PPPL, and the amendment to Rule 7 is prospective. However, the extended period of limitation was not applicable, and the penalties were set aside. The demand for the normal period was sustained with interest, and the appeals were partly allowed with consequential reliefs.
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