2023 (6) TMI 690 - AT - Central Excise

CENVAT Credit - input service distribution - services used in common for manufacturing, as well as for trading activities - recovery sought under rule 14 of CENVAT Credit Rules, 2004 - invocation of extended period of limitation - HELD THAT - There is no dispute that the appellant had taken the credit as assigned to them by head office, registered as input service distributor , in accordance with rule 7 of CENVAT Credit Rules, 2004. Several conditions are enumerated in the said rule and it is the contention on behalf of the appellant that none of these restrict distribution in the manner presumed by the adjudicating authority in the impugned order. As the entirety of the dispute pertains to credit availed between April 2006 and March 2009 which predates the deeming of trading as an exempted activity by notification no. 13/2011-CE dated 31.03.2011 and it is claimed by the appellant that denial of credit on this score has been held to be inappropriate in a catena of decisions of the Tribunal, in the first instance, it is to be ascertained if the decision in ROCA BATHROOM PRODUCTS PVT. LTD. VERSUS C.C.C., JAIPUR 2016 (12) TMI 223 - CESTAT NEW DELHI , relied upon by Learned Authorised Representative, serves to discard the claim. It is seen that the primary issue agitated before the Tribunal in that dispute was the jurisdictional competence of central excise authorities having control of the recipient of credit to raise demand for recovery under CENVAT Credit Rules, 2004 and the order impugned therein was upheld by discarding that claim without examining applicability of the retrospectivity issue decided in earlier orders of the Tribunal; this is not surprising as such a plea had not been made in that proceeding. From the records, it is seen that there is no allegation of the conditions prescribed having been breached in any manner in determination of distribution of credit by input service distributor which the head office was. The availment of the entirety of credit, so accrued, at the Peenya facility is not inconsistent with the law. The sole counter of Learned Authorised Representative to this ruling is a portion of the decision of the Tribunal in Roca Bathroom Products Pvt Ltd which is nothing more than recording of the findings in the order impugned therein with no further evaluation of that finding. Indeed, only the jurisdiction issue was before the Tribunal in that dispute. Therefore, there are no reason to discard the submission of Learned Counsel that assignable credit would have to be proportionately restricted to the extent of trading turnover only with effect from 1.04.2011. The impugned order lacks authority of law and, consequently, set aside - appeal allowed.

Summary

Issues involved:
The issues involved in the judgment include the confirmation of recovery of CENVAT credit under rule 14 of CENVAT Credit Rules, 2004 for the period from April 2006 to March 2009, the jurisdiction of central excise authorities over the distribution of credit, the eligibility of credit based on the nature of activities conducted by the appellant, and the retrospective effect of amendments to the rules.

Confirmation of Recovery of CENVAT Credit:
The appeal by M/s Anglo-French Drugs & Industries Ltd contested the recovery of Rs. 1,16,08,306/- availed as CENVAT credit under rule 14 of CENVAT Credit Rules, 2004. The dispute centered around the central excise authorities' contention that the appellant's credit availed was not in accordance with the rules, particularly regarding services used for manufacturing and trading activities. The core issue was the availment of credit for services not classified as 'input service.'

Jurisdiction and Validity of Credit:
The appellant argued that the proceedings lacked jurisdiction as the credit under dispute was validly available to them under rule 7 of CENVAT Credit Rules, 2004. They relied on previous decisions to support their claim that recovery of validly taken credit from the recipient was not envisaged under rule 14. The appellant also contended that the impugned show cause notices did not raise the issue of deployment of services for 'exempted activity,' emphasizing the non-retrospective nature of certain amendments.

Eligibility of Credit and Distribution:
The authorized representative contended that credit eligibility is determined by the actual use of services in the production of goods or rendering taxable services. They argued that services used for 'trading' activities rendered the credit ineligible for distribution. The circular issued by the Central Board of Excise & Customs was cited to support the position that excess credit due to improper distribution is ineligible.

Retrospective Effect and Distribution of Credit:
The dispute spanned the period between April 2006 and March 2009, predating the deeming of 'trading' as an exempted activity. The appellant claimed that denial of credit based on this ground had been deemed inappropriate in previous Tribunal decisions. The judgment analyzed previous rulings and emphasized that restrictions on credit distribution should align with the rules in force during the relevant period.

Conclusion:
The Tribunal found that the impugned order lacked legal authority and set it aside, allowing the appeal. The judgment highlighted the importance of adherence to the rules governing credit availment and distribution, emphasizing the need for proportionate restriction of credit based on the nature of activities conducted by the appellant.