2018 (1) TMI 1202 - AT - Central Excise

CENVAT credit - input services - sponsorship service - whether the appellant can avail the proportionate credit in respect of the sponsorship service, which is received for promotion of brand? - Held that - during the material period April, 2012 to March, 2014, there is no condition that the input service credit can be distributed on proportionate basis. W.e.f. 1.3.2016 by N/N. 13/2016-CE(NT), the provision was brought according to which, if the service was used commonly by all the units then the credit should be distributed to the ratio of turnover of each unit. The similar provision was not available at the material period. There was no restriction for distributing the credit or availing the credit by one unit alone. The distribution of the service of one unit is permissible prior to the amendment - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availing CENVAT Credit for Sponsorship Service
2. Distribution of credit between multiple units

Analysis:
1. The appellant availed CENVAT Credit for Sponsorship Service, specifically for brand promotion at their Akurdi unit. The department contended that since the brand promotion was for both Akurdi and Pithampur units, proportionate credit should have been taken for both units. The adjudicating authority and Commissioner (Appeals) upheld the denial of the entire credit. The appellant argued that as the service was received only at the Akurdi unit, the entire credit should be admissible there. They highlighted the absence of any provision for distributing credit to multiple units during the relevant period of April 2012 to March 2014 under the CENVAT Credit Rules, 2004. They cited the case law of Ecof Industries Pvt. Ltd. and Greeves Cotton Ltd. to support their position.

2. The key issue was whether the appellant could avail proportionate credit for the sponsorship service received for brand promotion. The Tribunal noted that no provision existed during the material period for distributing input service credit on a proportionate basis to multiple units. The introduction of Notification No. 13/2016-CE(NT) on March 1, 2016, allowed for such distribution based on turnover ratio if the service was used commonly by all units. Citing the judgment of the Hon'ble Karnataka High Court in Ecof Industries Pvt. Ltd., the Tribunal emphasized that there was no legal requirement for the unit that paid the tax to be the sole beneficiary of the credit. The Tribunal concluded that the appellant was entitled to the entire credit as the service was used solely at the Akurdi unit. Therefore, the appeal was allowed, setting aside the impugned order.

This detailed analysis of the judgment showcases the legal arguments, relevant case laws, and the Tribunal's reasoning behind allowing the appeal regarding the availing of CENVAT Credit for Sponsorship Service and the distribution of credit between multiple units.