2019 (2) TMI 1234 - AT - Central Excise

CENVAT credit - common input services for dutiable as well as exempt goods - advertisement service is commonly used for Jammu and Kashmir unit as well as Kadi unit - at Jammu and Kashmir, appellant are availing exemption Notification No.56/2002 and 57/2002 both dated 14.11.2002 - Held that - Even though there are two units of one assesse, prior to insertion of clause (d) in Rule 7 of the Cenvat Credit Rules 2004, there was no compulsion that in case of more than one unit the distribution of the cenvat credit should be done on the turnover of individual units. Therefore, prior to the said amendment i.e. before 01.04.2012 if the assesse has more than one unit entire credit can be taken in any one of the unit - However in the facts of the present case, the two units are located one in J&K and other in Kadi. As regard the J&K Unit, the appellant are availing exemption Notification 56/2002-CE. Any credit availed by unit who is availing the exemption notification 56/2002-CE the said credit can be utilized only for payment of duty on final product in respect of which exemption under the said respective notification is availed of - In the facts of the present case the credit attributed to J&K Unit was availed by the appellant in their Kadi Unit wherein Notification No. 56/2002-CE is not applicable. Consequently the appellant was neither entitled to take the credit nor able to utilize the same in the Kadi Unit - Therefore, the appellant for wrongly availed and utilized the cenvat credit in respect of advertisement service attributed to J&K unit. The appellant has wrongly availed the cenvat credit in respect of advertisement service attributed to the J&K Unit - appeal dismissed - decided against appellant.

Summary

Issues:
- Availment of Cenvat Credit for advertisement service in Kadi unit
- Applicability of exemption Notification No. 56/2002-CE to Jammu and Kashmir unit
- Interpretation of Rule 3(4) of Cenvat Credit Rules
- Scope of Show Cause Notice (SCN) allegations
- Admissibility of Cenvat Credit distribution between multiple units

Analysis:

1. Availment of Cenvat Credit for advertisement service in Kadi unit:
The appellant, engaged in manufacturing air conditioners, claimed Cenvat Credit for advertisement services in their Kadi unit. The department contended that since the Jammu and Kashmir unit operated under an exemption Notification, the appellant was not entitled to Cenvat Credit for services attributed to that unit. The appellant argued that there was no restriction on taking credit for services in one unit if the assessee had multiple units. They also highlighted that the exemption did not fully exempt goods from duty, only provided a refund. The Tribunal noted the absence of Rule 6 invocation for credit distribution, rendering the demand unsustainable.

2. Applicability of exemption Notification No. 56/2002-CE to Jammu and Kashmir unit:
The Revenue argued that under Notification No. 56/2002-CE, Cenvat Credit could only be used for duty payment on products enjoying the exemption. As the appellant used the credit in the Kadi unit where the exemption did not apply, they were not eligible for the credit. The Tribunal upheld this argument, emphasizing the specific provision of Rule 3(4) of the Cenvat Credit Rules, which limited credit utilization to products covered by the respective exemption notification.

3. Interpretation of Rule 3(4) of Cenvat Credit Rules:
Rule 3(4) stipulated that credit availed under an exemption notification could only be used for duty payment on products covered by that notification. The Tribunal clarified that the appellant wrongly utilized credit for advertisement services attributed to the Jammu and Kashmir unit in the Kadi unit where the exemption did not apply. This interpretation led to the dismissal of the appeals.

4. Scope of Show Cause Notice (SCN) allegations:
The appellant contended that the adjudication order and Commissioner (Appeals) decision exceeded the SCN's scope by addressing different issues. However, the Tribunal found the SCN's allegation regarding inadmissible credit due to the Jammu and Kashmir unit's exemption sufficient. The Tribunal held that this charge adequately justified the denial of Cenvat Credit, rejecting the appellant's argument of exceeding the SCN's scope.

5. Admissibility of Cenvat Credit distribution between multiple units:
Before an amendment in Rule 7, there was no obligation to distribute Cenvat Credit among multiple units based on turnover. However, in this case, the specific provision of Rule 3(4) restricted credit utilization to products covered by the exemption notification. The Tribunal concluded that the appellant wrongly availed and utilized credit for advertisement services in the Kadi unit, leading to the dismissal of the appeals.

In conclusion, the Tribunal upheld the department's decision, stating that the appellant incorrectly availed and utilized Cenvat Credit for advertisement services attributed to the Jammu and Kashmir unit in the Kadi unit where the exemption did not apply. The judgment emphasized the strict interpretation of Rule 3(4) and the sufficiency of the SCN's allegations in justifying the denial of credit.