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TMI Blog2024 (10) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... where the credit is availed based on the invoices issued by ISD. Further it is a settled issue that the department does not have jurisdiction to question the correctness of credit distributed by ISD from the recipient i.e. respondent which is merely availing the credit based on invoices issued ISD - reference made to the decision of the Tribunal in the case of Metro Shoes Pvt. Ltd. [ 2019 (9) TMI 1532 - CESTAT MUMBAI ], wherein the Tribunal has observed ' The appellant-assessee is a recipient of credit that is assigned by the distributor who, undisputedly, has borne the incidence of tax on procured services. It is the distributor who can be charged with awareness of exempted output/output service. if any, and who is empowered by the statute to take the credit. And it is only such availment by the distributor that can be put to notice for ineligibility as espoused in the decisions that fulfill the criteria of precedent.' The credit of service tax used exclusively in units manufacturing exempted goods cannot be attributed to a specific unit. Services like advertisement, manpower recruitment, market research etc are used by all the units and therefore, no input service has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 2,44,49,545/- along with interest and penalty on the ground that ISD has wrongly transferred the credit attributable to all units including the units at Guwahati in contravention of second proviso to Rule 3(4) of Cenvat Credit Rules. Further, show cause notices dated 09.09.2010 and 01.08.2011 alleged that the respondent is not eligible to take the credit of service tax paid on Clearing Forwarding Agents Services as it is a post manufacturing activity which is not used in or in relation to manufacturing of the goods. After following the due process, the Adjudicating Authority vide the common impugned order dropped the demand proposed in all the show cause notices on the basis that second proviso to Rule 3(4) ibid is only applicable on the input services used in manufacturing of the products. ISD distributed the credit of service tax paid on common input services which were received by ISD and not used directly in manufacturing by units in Guwahati. Further, the show cause notices do not allege the violation of conditions for distribution of credit by ISD prescribed in Rule 7 of the Cenvat Credit Rules. Further, the services provided by Clearing Forwarding Agents are input se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt s head office namely Advertisement, C F Agent Service, Professional and Consultancy Service, GTA Service, Telephone Service, Legal Service, Manpower Recruitment Supply Agency s Service, Software Support Service etc though fall in the inclusive clause of the definition of the input services are definitely used in relation to manufacture and clearance of the common finished goods i.e. All-Out by the respondent s five units including the two units located in Guwahati and availing the benefit of area based exemption under Notification Nos. 32-33/1999-CE. 4.6 He further submits that the Adjudicating Authority has erred in agreeing with the respondent s submission that all the aforesaid input services received in their head office has no relation with the manufacturing activities of their units based in Guwahati without giving any reason for accepting the averment of the respondent. He further submits that the input service credit availed by the head office was required to be apportioned on proportional basis depending upon the clearance of a particular unit in a given financial year and thereafter should have distributed part of input service credit related to the quantity of finishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the concept of difference in services procured for manufacturing and post sale services. She further submits that second proviso to Rule 3(4) provides that the Cenvat Credit of service tax paid on input services which are utilized in manufacturing of the final products cleared after availing the exemption notifications shall be utilized only for payment of duty on the final products in respect of which such exemption was availed. She also submits that the common services like advertisement expenses, C F agents, market research etc received by ISD are not used directly in the manufacturing of final products cleared by the respondent and therefore, these services are out of the purview of restriction of second proviso to Rule 3(4). She further submits that there were only two restrictions on ISD for distributing the credit amongst the units which have not been violated in the instant case and hence, proviso to Rule 3(4) limiting such credit availment does not apply where the credit is availed based on the invoices issued by ISD. In this regard, she relies on the following decisions: Godrej Consumer Products Ltd vs. CGST CE, Puducherry 2019 (369) ELT 841 (Tri. Chennai) Little Star Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the returns in which they disclosed all the required details. For this submission, she relies on the following decisions: Mahanagar Telephone Nigam Ltd vs. UOI and ors 2023-TIOL-407-HC-DEL-ST CCE Cus vs. M/s Reliance Industries Ltd 2023-TIOL-94-SC-CX 5.6 As regards the interest and penalty, the learned Counsel submits that when the demand itself is not sustainable, therefore, the question of interest and penalty does not arise. 6. We have considered the submissions made by both the parties and perused of the material on record. Before we examine the allegation of the department, we think it would be appropriate to reproduce the relevant extract of Rule 3(4) of Cenvat Credit Rules, which is reproduced herein below: Rule 3(4) The CENVAT credit may be utilized for payment of (a) any duty of excise on any final product; or (b) . (c) (d) . (e) service tax on any output service : Provided . Provided further Provided [also] that the CENVAT credit of the duty, or service tax, paid on the inputs, or input services, used in the manufacture of final products cleared after availing of the exemption under the following notifications of Government of India in the Ministry of Finance (Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - (i) No. 32/99-Central Excise, dated the 8th July, 1999 [GSR 508(E), dated 8th July 1999]; (ii) No. 33/99-Central Excise, dated the 8th July, 1999 [GSR 509(E), dated 8th July 1999]; (iii) No. 39/2001-Central Excise, dated the 31st July, 2001 [GSR 565(E), dated the 31st July, 2001]; (iv) No.56/2002-Central Excise, dated the 14th November, 2002 [GSR 764(E), dated the 14thNovember, 2002]; (v) No.57/2002-Central Excise, dated the 14th November, 2002 [GSR 765(E), dated the 14th November, 2002]; (vi) No.56/2003-Central Excise, dated the 25th June, 2003 [GSR 513(E), dated the 25th June, 2003]; (vii) No. 71/2003-Central Excise, dated the 9th September, 2003 [GSR 717(E), dated the 9th September, 2003]; shall, respectively, be utilized only for payment of duty on final products, in respect of which exemption under the said respective notifications is availed of. The above proviso clearly shows that the units who avail credit of duty or service tax if availing the area based exemptions shall utilize the credit only for payment of duty on final products in respect of which exemption under the respective notifications has been availed. It is an undisputed fact that various services were availe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the demand raised alleging that the appellant has violated provisions of Rule 2(1) r/w proviso to Rule 3(4) cannot sustain and requires to be set aside, which we hereby do. 6.2 The demand of Rs. 1,86,113/- has been raised alleging that the appellant has availed credit on membership fee of Bombay Gymkhana Club Ltd. and that these are not eligible input services. After perusing the records, we agree with the view taken by the authority below as we find that such membership fee paid by the appellant does not have any nexus with their manufacturing activity. The demand raised on this ground is therefore upheld without any interference. In view of the above said decision, we hold that second proviso to Rule 3(4) does not apply in the present case. 8. Further, we note that that it is a settled issue that the department does not have jurisdiction to question the correctness of credit distributed by ISD from the recipient i.e. respondent which is merely availing the credit based on invoices issued ISD. In this regard, we may refer to the decision of the Tribunal in the case of Metro Shoes Pvt Ltd (cited supra), wherein the Tribunal has observed as under: 18 . The assessee-appellant is st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xempted goods cannot be attributed to a specific unit. Services like advertisement, manpower recruitment, market research etc are used by all the units and therefore, no input service has been exclusively utilized in respondent s Guwahati units. Show cause notices also have not established that these input services were exclusively utilized in Guwahati units. In view of the above, we hold that Guwahati units are not exclusively engaged in manufacturing and clearing the exempted goods and therefore, ISD has not violated the conditions of Section 7(b) and instead correctly followed the same. 11. As regards extended period of limitation concerned, we find that the respondent and ISD have been regularly filing the returns wherein they have been showing the Cenvat Credit availed by them and the department has not brought anything on record to show that the respondent and ISD have concealed the material facts with intent to evade the payment of tax. Therefore, extended period of limitation cannot be invoked in the present case. 12. As regards interest and penalty, the question of interest and penalty does not arise because the demand of service tax itself is not sustainable. 13. In view ..... 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