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TMI Blog2023 (11) TMI 720X X X X Extracts X X X X X X X X Extracts X X X X ..... at Puducherry, the excise formation at Puducherry lacks jurisdiction to allege wrong availment of credit, issue notice of demand to disallow the credit or recover the same. In other words, it is argued that the Puducherry unit being the unit which has received the credit which was distributed by Bangalore unit, the eligibility of credit cannot be questioned at the end of recipient unit. From Rule 14, it is clear that the wrongly availed credit is to be recovered from the manufacturer/ service provider. Rule 14 uses the words taken and utilised wrongly . Later, in 2008, the word and was substituted with or . It has to be stated that, whether be it AND or OR the demand can be made against the appellant-manufacturer who has utilised the credit for payment of duty - In the present case, the Bangalore unit is not able to utilise the huge credit. It is only the manufacturing unit that can utilise the credit for payment of duty. For this reason, we have to say that the Show Cause Notice issued to the appellant- Puducherry unit is well within the jurisdiction. The method of ISD registration and distribution between several units of a corporate body is a facilitation by which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acceptable. The denial of Cenvat Credit for different periods and the demand raised thereon cannot sustain. The issue on merits is answered in favour of assessee and against the Revenue - Appeal allowed. - HON BLE MS. SULEKHA BEEVI C. S., MEMBER ( JUDICIAL ) And HON BLE MR. VASA SESHAGIRI RAO, MEMBER ( TECHNICAL ) For the Appellant : Shri. V. Lakshmikumaran, Senior Advocate Smt. R. Charulatha, Advocate For the Respondent : Shri R. Rajaraman, Assistant Commissioner (A.R) ORDER Order : Per Ms. Sulekha Beevi C.S. The issue involved in all these appeals being connected and similar they were heard together and are disposed by this common order. 1. Brief facts are that the appellants are engaged in manufacture of computer/Automatic Data Processing Machines falling under chapter Heading No. 8471 of the Central Excise Tariff Act, 1985 and are registered with the Central Excise Department. The appellant was availing Cenvat Credit of duty paid on inputs and service tax paid on input services in terms of Cenvat Credit Rules 2004 (CCR,2004). 2. On scrutiny of the ER-1 returns filed by appellant for the different periods, it was noticed by the department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 E/411/2012 October 2004 to March 2010 9/2012 dt. 30-03-2012 3 E/41384/2013 March 2011 to January 2012 11/2013 dt. 20-03-2013 4 E/41478/2015 February 2012 to September 2012 11 12/2015 dt. 31-03-2015 5 E/41479/2015 October 2013 to March 2013 6 E/42303/2015 April 2013 to September 2013 30/2015 dt. 21-08-2015 7 E/41132/2016 December 2013 21-23/2016 dt. 3-3-2016 8 E/41133/2016 March 2014 9 E/41134/2016 April 2014 10 E/41662/2016 July 2014 to December 2014 31/2016 dt. 6-6-2016 11 E/41852/2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, eligibility of Cenvat credit taken by the ISD was not questioned by the jurisdictional officer of the corporate office at Bengaluru. 6.6 As per Rule 9(1) of CCR, an input service distributor can take credit on the basis of documents mentioned therein and is also required to file half- yearly returns to the jurisdictional Superintendent of Central Excise under Rule 9(10) of CCR. Therefore, the contention of the Department that only a manufacturer can take credit and the responsibility is solely on the manufacturer to prove the eligibility of the credit taken is incorrect. In any case, as per the definition of an Input Service Distributor under 2(m) of CCR, an ISD is an office of the manufacturer or producer of final products or provider of output service; In the case of Commissioner of Service Tax Ahmedabad v. Godfrey Philips India Lid 2009 (239) ELT 323 (Tri Ahmd), it was held that an ISD is not merely a dealer, but an office of the manufacturer or output service provider and eligibility of credit has to tested at the end of ISD only. 6.7 It is submitted by the Ld. Counsel that unlike inputs, input services are intangible and there is no necessity that services should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice Tax Ahmedabad v Godfrey Philips India Lid-2009 (239) ELT 323 (Tri-Ahmd) ii. United Phosphorous Ltd v Commr Of CEx Surat -11-2013 (30) STR. 509 (Tri- Ahmd.) iii. M/s Oil and Natural Gas Corporation Ltd. v. CCE Vadodara 2013 (8)TMI 61-CESTAT Ahmedabad iv. Commr. Of Central Excise, Chennai v. M/s.Schneider Electric India Pvt. Ltd. - 2018 (1) TMI 1010-CESTAT Chennai. v. Ericsson India Pvt. Ltd. v. CCCE ST. Hyderabad-II-2019 (1) TMI 722-CESTAT Hyderabad. vi. Metro Shoes Pvt. Ltd. v. Commr. Of Central Excise, Mumbai-I - 2019(9) TMI 1532. 6.12 In the case of Metro Shoes Pvt. Ltd Commr of Central Excise. Mumbai-1 2019 (9) TMI 1532 the Tribunal held that the decisions in Mahindra and Mahindra Ltd v Commissioner of Service Tax, Mumbai (2017- TROL-2364-CESTAT-MUM), Indian Oil Corporation v Commissioner of Central Excise Delhi-11 (2014 (35) STR 411 (Tri-Del) and SKF India Lid v. Commissioner of Central Excise, Pune-1 [2016 (41) STR 737 (Tri-Mumbai)] are distinguishable and fails the test of precedence. Further, after considering the recovery mechanism under Rule 14 and the Circular F.No. 137/68/2013-ST dated 10.03.2014 issued by the Board, the Tribunal in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18. The assessee-appellant is statutorily acknowledged as a manufacturer covered by Central Excise Act, 1944 and any recovery can be effected only under section 11A of that Act More so, the duty liability intended to be recovered must have been short-paid or not paid, no such allegation has been made in the notice or held to be so by the lower authorities. The corporate enterprise that has established this manufacturing facility is not acknowledged by Central Excise Act, 1944 and dereliction on their part, if any, cannot be brought within the purview of this Act unless it he in relation to manufacture. Even if such recovery is ordered with reference to rule 14 of CENVAT Credit Rules 2004, wrongful availment must be established. In the scheme of input service distribution, the assessee-appellant is not required by the framework Rules, to ascertain eligibility or the cognizant of the source of credit It is a well-settled principle of natural justice that an assessee must not only be made aware of the reasons for proposed detriment but also be capable of defending its actions The scheme of CENVAT credit precludes such defence by the appellant-assessee. The appellant-assessee is a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos. 41478, 41479/2015, E/42303/2015, E/41132,41133,41134/2016, E/41662/2016, E/41852/2017] 8. Category 1: Credit availed on input services disputed on the ground of no nexus to manufacture. [Appeal Nos. E/410/2012 E/41384/2013] Disputed Input Services: E/410/2012: Broadcasting, Advertising, Banking Insurance, Maintenance Repair services, Consulting Engineering Services, Courier services, Rent (Factory), Freight, Warranty services etc. E/41384/2013: Advertisement, BAS, Commission charges, courier charges, consultancy fees, freight charges, insurance premium, IT software charges, maintenance charges, manpower charges, professional charges, recruitment charges, rental charges, telephone charges, warranty charges, etc. Appeal No. Case of the Department Submissions E/410/2012 Out of an amount of Rs.4,12,00,000/- distributed to the Appellant, Rs.2,38,39,442/- is disputed on the ground that services on which credit is availed have no nexus with manufacture and hence, is not eligible input services under Rule 2(l) of CCR. For this, the Impugned Order relies on the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 9. Category 2: Credit availed on input services disputed by the Department on the ground that it pertains to trading activity. [Appeal No. E/411/2012] A. Case of the Department: The allegation in the SCN is that out of Rs. 4,12,00,000/- distributed to the manufacturing unit vide ISD Invoice dated 05.03.2010, Rs. 1,73,60,558/- relates to trading activity. It is the case of the Department that the disputed credit pertains to trading which is not an eligible input service under Rule 2(l) of the CCR. B. In this regard, the following submissions are made, each of which are in the alternative and without prejudice to each other: B.1 The Corporate office of the Appellant has distributed a sum of Rs. 4,12,00,000/- out of a total credit of Rs. 7,93,09,910/- lying with them and the said fact is not under dispute. The Department first (E/410/2012) seeks to deny a sum of Rs. 2,38,39,442/- on the ground of lack of nexus to manufacturing activity and then disputes the balance amount of credit to be in relation to trading (Rs. 4,12,00,000 Rs. 2,38,39,442 = Rs. 1,73,60,558). The Appellant submits that the Department has disputed the credit of Rs. 1,73,60,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od orders impugned, the Department itself has considered and held most of the services received by the Appellant to be valid input services as per Rule 2(l) of the CCR. The same is captured against each of the disputed input services in the table below. B. Manner of Distribution: Though the Impugned Orders in Appeal Nos. E/41478, 41479, 42303/2015 had held the manner of distribution to be incorrect, the Impugned Orders passed for the subsequent periods (E/41132, 41133, 41134/2016, E/41662/2016, E/41852/2017) have validated the method of distribution and held that the manner of distribution done by the Appellant is in accordance with the law. There is no change in the manner of distribution across the periods involved. C. Eligibility of Input Services: S. No Input Services Submissions 1 Advertisement services Held to be an eligible input service in the Impugned Orders in all the Appeals. Not disputed in Impugned Order pertaining to Appeal No. E/41852/2017. [Para No. 17.1 at Page No. 92 of Appeal No. E/41662/2016] 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 Custom House Agent services Held to be an eligible input service in Impugned Orders in all the Appeals. [Para No. 17.3 at Page No. 93 of Appeal No. E/41662/2016] 9 Factory expenses Disputed in Impugned Order in Appeal No. E/41478, 41479/2015 and held to be an eligible input service in the same order. [Para No. 11.16 at Page No. 103 of Appeal No. E/41478, 41479/2015] 10 Freight Charges Held to be ineligible input services in Impugned Orders in Appeal Nos. E/41478, 41479/2015 E/42303/2015. However, held to be eligible in subsequent period orders in Appeal Nos. E/41132, 41133, 41134/2016 E/41662/2016. [Para No. 17.4 at Page No. 94 of Appeal No. E/41662/2016] 11 Insurance services (including Total Cover) Held to be ineligible input services in Impugned Orders in Appeal Nos. E/41478, 41479/2015 E/42303/2015. However, held to be eligible in subsequent period orders in Appeal Nos. E/41132, 41133, 41134/2016 E/41662/2016. [Para No. 17.6 at Pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, held to be eligible in subsequent period orders in Appeal Nos. E/41132, 41133, 41134/2016 E/41662/2016. [Para No. 17.15 at Page No. 105 of Appeal No. E/41662/2016] 20 Sales commission Held to be ineligible input services in Impugned Order in Appeal Nos. E/41478, 41479/2015 E/42303/2015. However, held to be eligible in subsequent period orders in Appeal Nos. E/41132, 41133, 41134/2016 E/41852/2017. [Para No. 18.5 at pg. no. 75 of Appeal No. E/41852/2017] 21 Sales promotion services Held to be ineligible input services in Impugned Order in Appeal Nos. E/41478, 41479/2015 E/42303/2015. However, held to be eligible in subsequent period orders in Appeal Nos. E/41132, 41133, 41134/2016 E/41662/2016. [Para No. 17.12 at Page No. 100 of Appeal No. E/41662/2016] 22 Security services Disputed in Impugned Order in Appeal Nos. E/41478, 41479/2015 and held to be an eligible input service in the same order. [Para No. 11.11.1 at Page No. 100 of Appeal No. E/41478, 41479/2015] 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4: Credit availed on input services which have been disputed by the Department in all Appeals. [Appeal Nos. E/41478, 41479/2015, E/42303/2015, E/41132, 41133, 41134/2016, E/41662/2016, E/41852/2017] A. Housekeeping Services: [Para no. 11.17 at page no. 94 of Appeal Nos. E/41132, 41133, 41134/2016] A.1 It is submitted that housekeeping services are eligible input services under Rule 2(l) of the CCR and credit ought to be allowed on the same. Housekeeping services of both factory and office have been held to be an eligible input service. A.2 In the case of M/s. Indian Additives Limited v. Commissioner of GST and Central Excise, Chennai North Commissionerate 2022 (11) TMI 338- CESTAT Chennai, the Hon ble Tribunal held housekeeping services in relation to office to be eligible stating that office is an integral part of the Appellant s business and engages in administrative work in respect of the factory. A.3 Further, reliance is placed on the following cases wherein housekeeping was held to be an eligible service: (i) Orient Bell Limited v. Commissioner of Central Excise, Noida- 2017 (52) S.T.R. 56 (Tri. - All.) (ii) Temenos India Private Limited v. Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hram appeared for the Department. The issue of jurisdiction was countered by the Ld. Authorized Representative, by adverting to Rule 14 of CCR,2004. The demand has been raised invoking Rule 14 of CCR, 2004 read with subsection (1)/proviso to subsection (1) of Section 11(A) of Central Excise Act, 1944. It is submitted that as per Rule 14 of CCR, 2004, the demand can be raised against the assessee who has wrongly taken and utilized the credit. The Bangalore Head office is not able to utilise the credit. It is the appellant manufacturing unit situated at Puducherry which has utilized the in eligible credit for payment of duty/tax. This being so, the demand raised against the appellant is with proper jurisdiction. To support this argument the Ld. Counsel relied on the decision rendered by Tribunal in the case of Clariant Chemicals India Ltd vs. Commissioner of Central Excise [2015-TIOL-2510 Cestat (Mum)]. 13.2 On merits, the Ld. Authorized Representative submitted as under:- A. The appellant accumulated CENVAT credit in their Bangalore office, which was doing both trading as well as rendering services. In Bangalore they were availing credit on certain input services which were u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture of final products and clearance of final products up to the place of removal. and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, accounting, auditing, financing recruitment and quality control, coaching and training computer networking. credit rating, share registry, security, business exhibition, legal services, Inward transportation of inputs or capital goods and outward transportation up to the place of removal, but excludes services. E. From the above, it is very clear that to qualify as input services, input service should be used in or in relation to the manufacture of the final product and the input services must be integrally connected with the manufacture of the final product. Further there should be a nexus between the input service and the goods manufactured. F. The argument of the appellant that the ISD office distributed the credit and hence, the input tax which is distributed has already acquired the natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w.e.f. 01.04.2011. Prior to this date also as trading is neither service nor manufacture credit on services availed for trading is not admissible. Therefore, the availment of Cenvat Credit on the services pertaining to trading activity is not in order as per Rule 3 of CCR, 2004 and liable to be recovered. As the appellant had availed wrong credit by suppressing the fact with intention to evade payment of duty equal penalty was imposed for contravention of Rule 15(1) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. 13.3 It is submitted that the appeals may be dismissed. 14. Heard both sides and perused the records carefully. 15. The first point argued by the Ld. Counsel for appellant is that Show cause notices issued to the appellant- manufacturing unit at Puducherry is without jurisdiction. The Head office situated at Bangalore is registered as ISD and thus distributed the credit to the appellant in terms of Rule 7 of CCR, 2004. The definition of input service Distributor in Rule 2 (m) of CCR reads as under: m) input service distributor means an office of the manufacturer or producer of final products or provider of output service, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15.3 On perusal of the Show Cause Notice, it is seen that the provisions under Sec 11(A) along with Rule 14 have been invoked to raise the demand. Rule 14 of CCR 2004 reads as under:- RULE 14. Recovery of CENVAT credit wrongly taken or erroneously refunded. (1) (i) Where the CENVAT credit has been taken wrongly but not utilised, the same shall be recovered from the manufacturer or the provider of output service, as the case may be, and the provisions of section 11A of the Excise Act or section 73 of the Finance Act, 1994 (32 of 1994), as the case may be, shall apply mutatis mutandis for effecting such recoveries; (ii) Where the CENVAT credit has been taken and utilised wrongly or has been erroneously refunded, the same shall be recovered along with interest from the manufacturer or the provider of output service, as the case may be, and the provisions of sections 11A and 11AA of the Excise Act or sections 73 and 75 of the Finance Act, 1994, as the case may be, shall apply mutatis mutandis for effecting such recoveries. 15.4 From Rule 14, as above it is clear that the wrongly availed credit is to be recovered from the manufacturer/ service provider. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring unit wise. Thus, credit of input services is also required to be available to each manufacturing unit separately. Since the services may be across various offices or manufacturing unit, it is in order to sort out this difficulty of the trade, the concept of input service distributor was envisaged wherein a person having various manufacturing units or branch offices etc. would receive the invoices pertaining to services at one place i.e. offices and thereafter distribute the credit of service tax to various manufacturing units. Thus legally ISD as also its manufacturing unit is single legal entity. To our mind, the learned counsel is unnecessarily trying to bifurcate the ISD office and the manufacturing unit as two different distinct and legal entities. The situation is like the brain of a human being controlling different parts of the body, say hand. Similarly, here the head office would normally be controlling different manufacturing units or branch offices. Thus the distinction between the location of ISD and that of manufacturing unit itself is immaterial. Credit is finally availed and utilized by the manufacturing unit. What learned counsel is trying to say is that show ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it contained the words activities relating to business . So for the period prior to 01.04.2011 are availed for activities relating to the credit availed is eligible as these services are business of the manufacturer. For the period after 01.04.2011 it can be seen that in the appellant s own case the credit availed on all services, except Housekeeping services and AMC/warranty services have been allowed. The department having allowed the credit for certain period cannot deny credit for other subsequent/different periods. 17.1 It is submitted by the appellant that Housekeeping services were availed for the Housekeeping of both factory and office premises. These services are availed to keep the premises in a clean and hygienic manner. The Tribunal in the case of M/s Indian Additives Limited (supra) 2022(11) TMI 338 CESTAT Chennai, held that the services availed for cleaning the office/ factory premises is eligible for credit. 17.2 The reason for denying the credit on warranty charges is that, the invoice does not separately show the service tax component. There can be no denial of the fact that service is involved while discharging warranty service. The warranty and AMC are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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