2023 (5) TMI 1079 - AT - Central Excise

CENVAT Credit - Distribution of CENVAT Credit - 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 Biscuits and its contract manufacturing units, including the appellant - rule 7(d) of the CENVAT Rules - HELD THT - A Division Bench of the Tribunal while hearing Excise Appeal No. 52692 of 2019, Excise Appeal No. 52693 of 2019 and Excise Appeal No. 52694 of 2019 expressed reservations about the proposition of law laid down by the Division Bench in SUNBELL ALLOYS CO OF INDIA LTD MACHSONS PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS 2014 (2) TMI 297 - CESTAT MUMBAI and also noticed that a Division Bench of the Tribunal in COLGATE PALMOLIVE (INDIA) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE 2011 (2) TMI 57 - CESTAT MUMBAI had taken a contrary view. 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 answered the reference holding 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 (Krishna Food), under rule 7(d) of the CENVAT Rules. The order passed by the Commissioner (Appeals) cannot be sustained and is set aside - The appeal is accordingly, allowed.

Summary

Issues:
The appeal seeks to challenge the order confirming the demand of CENVAT credit by the Adjudicating Authority. The main issue is whether Parle Biscuits was justified in distributing credits on input services to its contract manufacturing units on a pro-rata basis under the CENVAT Rules.

Details:
The appellant, a contract manufacturing unit for Parle Biscuits, claimed to be authorized by Parle Biscuits to manufacture biscuits on its behalf and comply with all procedural formalities under the Excise Act. The inputs for manufacturing the biscuits were supplied by Parle Biscuits, and the appellant availed CENVAT credit for payment of duty on the cleared biscuits. The final product was cleared on payment of excise duty based on the maximum retail price declared by Parle Biscuits. Parle Biscuits, as an input service distributor, centralized certain services like advertisement and marketing for all manufacturing units, including the appellant. Four show cause notices were issued to the appellant regarding the denial of CENVAT credit distributed by Parle Biscuits.

The key issue in the appeal was whether Parle Biscuits was justified in distributing credits on input services to its contract manufacturing units on a pro-rata basis under rule 7(d) of the CENVAT Rules. A Larger Bench of the Tribunal answered this issue in favor of the appellant, stating that Parle Biscuits was justified in distributing credits in such manner. Consequently, the order of the Commissioner (Appeals) confirming the demand of CENVAT credit was set aside, and the appeal was allowed.