2023 (12) TMI 845 - AT - Central Excise

Recovery of wrongly availed CENVAT Credit - common input services used in or in relation to manufacture as well as trading - Head Office distributed credit availed on common input services used for both manufacture of finished goods as well as trading of goods - periods October 2012 to June 2013 and July 2013 to June 2014 - HELD THAT - The foremost argument put forward by the Ld. counsel for the appellant is that the Department ought to have issued Show Cause Notice to the Head Office as it is the Head Office which has availed credit and distributed to the appellant as per the provisions of CENVAT Credit Rules, 2004. The Show Cause Notice is issued invoking Rule 14 of CENVAT Credit Rules, 2004. The said Rule states as credit wrongly availed or utilized . The credit is utilized by the appellant. In such circumstances, the Show Cause Notice issued to the appellant alleging wrongful availment of credit, is valid though it is the Head Office which has distributed the credit. The second argument advanced by the appellant is that the Head Office has been maintaining separate accounts and that the Head Office has not distributed credit of input services pertaining to trading. The appellant has furnished detailed reconciliation statement. However, this requires to be verified - the matter requires to be remanded to the adjudicating authority who is directed to verify the contention of the appellant that credit pertaining to trading has not been distributed by Head Office and availed by the appellant. The adjudicating authority is also directed to verify the reconciliation statement furnished by appellant. The impugned order is set aside - Appeal is allowed by way of remand.

Summary

Issues Involved:
The issues involved in this case are the wrongful availing of CENVAT Credit by the appellant unit, the jurisdiction of the Show Cause Notice issued to the appellant unit, and the distribution of credit by the Head Office.

Issue 1: Wrongful Availing of CENVAT Credit
The appellants, engaged in the manufacture of sanitary wares, availed CENVAT Credit of duty paid on inputs and input services distributed by their Head Office, registered as an 'Input Service Distributor'. The Department alleged that the appellant had availed ineligible credit on common input services used for both manufacturing finished goods and trading goods. Show Cause Notices were issued for recovery of wrongly availed credit, interest, and penalties. The original authority and Commissioner (Appeals) upheld the demand. The appellant argued that the Show Cause Notice was without jurisdiction as it was the Head Office that distributed the credit and no notice was issued to them. The appellant maintained that they were not in a position to prove the eligibility of credit and the Department should have initiated proceedings against the Head Office instead.

Issue 2: Jurisdiction of Show Cause Notice
The appellant contended that the Department should have issued the Show Cause Notice to the Head Office, which had distributed the credit as per the CENVAT Credit Rules, 2004. The appellant argued that since they received the credit from the Head Office, any dispute regarding eligibility should be addressed with the Head Office. The Department, however, asserted that the Show Cause Notice issued to the appellant was legal and proper, as the appellant had availed ineligible credit on common input services. The Department highlighted that the reconciliation statement provided by the appellant was not considered by the authorities below.

Issue 3: Distribution of Credit by Head Office
The appellant further argued that the Head Office had not availed any credit on trading activities and maintained separate accounts. They submitted a reconciliation statement showing that no credit on input services related to trading was availed by them. The Department contested this claim, stating that the appellant failed to prove that they did not avail credit on input services pertaining to trading. The Tribunal decided to remand the matter to the adjudicating authority to verify the appellant's contentions regarding the distribution of credit by the Head Office and the reconciliation statement provided.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter to the adjudicating authority for further verification based on the directions provided. The appeal was allowed by way of remand, emphasizing the need to verify the distribution of credit by the Head Office and the reconciliation statement submitted by the appellant.