2021 (7) TMI 296 - AT - Central Excise

Distribution of credits on input services - distribution on a pro-rata basis proportionate to the turnover of each unit between the manufacturing plants of Parle Biscuits and its contract manufacturing units - correctness of issuance of Input Service Distributors invoice by Parle to its contract manufacturing unit - contract manufacturing carried out in terms of N/N. 36/2001-CE (NT) - HELD THAT - The Division Bench, while hearing Excise Appeals, expressed reservations about the proposition of law laid down by the Division Bench in Sunbell Alloys Co. Of India Ltd. vs. Commissioner of Central Excise Customs, Belapur 2014 (2) TMI 297 - CESTAT MUMBAI and also noticed that a Division Bench of the Tribunal in Colgate Palmolive (I) Ltd. vs. Commissioner of Central Excise, Mumbai-I 2011 (2) TMI 57 - CESTAT MUMBAI had taken a contrary view. The Division Bench, therefore, referred the questions for consideration by a Larger Bench of the Tribunal. The Larger Bench of the Tribunal in M/S. KRISHNA FOOD PRODUCTS, M/S. MARIAMMA R. IYER, M/S. PARLE BISCUITS PVT LTD. VERSUS THE ADDITIONAL COMMISSIONER OF CGST C. EX 2021 (5) TMI 906 - CESTAT NEW DELHI has held that Parle was justified in distributing credits on input services attributable to the final product on a pro-rata basis proportionate to the turnover of each unit between the manufacturing plants of Parle and its contract manufacturing units, including the appellant, under rule 7(d) of the CENVAT Rules. In view of the aforesaid answer given by the Larger Bench of the Tribunal, the order passed by the Commissioner (Appeals) cannot be sustained and is set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Assailing the order passed by the Commissioner (Appeals) regarding CENVAT credit demand confirmation.
2. Justification of distributing credits on input services between manufacturing plants and contract manufacturing units.
3. Legal and correct issuance of Input Service Distributors' invoice by one party to another in contract manufacturing.
4. Entitlement to CENVAT credit when input service is attributed to goods on which excise duty is paid.

Analysis:
1. The appeals sought to challenge the order confirming the demand of CENVAT credit against one party, which was upheld with interest and penalty by the Adjudicating Authority. Additionally, appeals against the imposition of penalty were dismissed for other parties.

2. The main issue in all appeals was whether distributing credits on input services between manufacturing plants and contract manufacturing units was justified. The Tribunal referred this question to a Larger Bench due to conflicting views in previous cases.

3. The Larger Bench answered that the distribution of credits on input services by one party to another in contract manufacturing was legal and correct under the CENVAT Rules. This decision rendered the second issue irrelevant for consideration.

4. Consequently, the order passed by the Commissioner (Appeals) was set aside, and all three appeals were allowed in favor of the appellants. The decision clarified the entitlement to CENVAT credit when input services are attributed to goods on which excise duty is paid.

This comprehensive analysis of the judgment addresses the key issues involved, the legal interpretations made by the Tribunal, and the final outcome of the appeals, providing a clear understanding of the case and its implications.