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TMI Blog2024 (12) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... uch as Cruiser, Alika, Gramoxone, Curacron, Ekalux, Matedor etc. falling under Chapter heading 38 of the schedule to the Central Excise Tariff Act, 1985. The appellant manufactures the final product on job work basis for M/s. Syngenta India Limited and M/s. Syngenta Crop Protection Pvt. Limited. The final product manufactured by the appellant are cleared by them on payment of duty for domestic clearance or for export purpose. The appellant are availing Cenvat credit of duty paid on inputs, capital goods and input service as per the provisions of Cenvat Credit Rules, 2004. The department noticed that the appellant have availed Cenvat credit on the strength of the invoices issued for distribution of service tax credit by M/s. Syngenta India Limited as Input Service Distributor and the department is of the view that appellant are not eligible to avail and utilize the input service credit distributed by M/s. Syngenta India Limited as the appellant is not a manufacturing unit of M/s. Syngenta India Limited. 2. On the basis of above facts, a show cause notice dated 15.4.2015 came to be issued demanding reversal of Cenvat credit amounting to Rs. 2,72,21,989/-. As per the provisions of Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch unit between manufacturing plants and contract manufacturing units including the job workers. 5. The learned advocate has also placed reliance of the decision of principal bench, New Delhi in the case of M/s. Krishna Food Products vs. The additional Commissioner of CGST C.Ex., Indore 2021-VIL-210-CESTAT- DEL-CE. The learned advocate argued that the Tribunal in the case of M/s. Krishna Food Products (supra) held that Rule 7 of Cenvat Credit Rules, 2004 allows distribution of credit to its manufacturing units which also cover the job work units working for the principal manufacturer. 6. We have also heard Shri Rajesh R. Kurup, learned Superintendent (AR) who reiterated the findings as given in the impugned order-in-original. 7. Having heard both the sides, we are of the view that the matter is no longer res-integra as in the case of Sweety Industries vs. CCE C-Anand (supra) has held that Input Service Distributor is also entitled to distribute Cenvat credit of various input services to its job work units. The relevant portion of the above mentioned order is reproduced here below:- 26. What is also important to notice is that rule 7 of the CENVAT Rules allows distribution of credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Government of India in all its policies relating to Customs, Excise and Foreign Trade as revealed in a plethora of policy documents, legislation, and procedures. ********** ***** ********* The expression his factory should be interpreted to mean the factory where the importer wants to utilise the imported goods in terms of the Notification. The Department can not insist on ownership of the factory and deny registration for the purposes of the Notification. The Tribunal, in the case of Commissioner of Central Excise, Bangalore v. Electronic Research Ltd. cited by the Id. Advocate, has held that literal meaning of statute should be abandoned if it leads to unjustified results. In that case, goods imported under Concessional rate of duty for use in one factory were transferred to the factory of the importer at another place under certain circumstances. The Commissioner (Appeals) decided in favour of the importer. Revenue came in appeal before the Tribunal. The Tribunal held that the importer was entitled to exemption as neither the Rules nor the Notifications itself prohibited such transfer. The above decision was held in the context of the Customs (Import of Goods at Concessio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Specialties Ltd. to the job-workers does not satisfy the condition that the credit is distributed to its manufacturing units. It is a settled position of law that job- workers who actually undertake the manufacturing process is the 'manufacturer' of goods and not the supplier of raw materials. 5.7 In the light of these evidences available on record, it is crystal clear that the appellants are manufacturers on their own right and there is no manufacturing of goods on account of M / s Merck Specialties Pvt. Ltd. Once this position is clear, the rules relating to input service credit distribution becomes easy to interpret. As per Rule 2(m) of the CCR, 2004 input service distributor' means an office of the manufacturer or producer of output service. In this case, the distributor is M / s Merck Specialties Ltd. whereas the manufacturers are the appellants. Since these are separate legal entities, office of M / s Merck cannot be considered as an office of the manufacturer and hence Merck cannot be considered as an input service distributor' as defined under Rule 2(m) of the CCR, 2004. Further, as per Rule 7, the input service distributor has to distribute the credit to & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in FDC also needs to be referred to, wherein after relying upon the decision of the Tribunal in Tamil Trading Corporation, it was held : 4. We have carefully considered the submissions made by both sides and perused the records. The issue in dispute lies in a narrow compass that imported goods under exemption notification carrying condition of end use. Under Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 whether goods can be used in the importer's own factory or also can be used in the job worker factory. There is no dispute the goods were used on behalf of the appellant in their loan licensee (job work factory) on behalf of the appellant only. The ownership of goods remained with the appellant right from import of the goods up to the use in the final product. In this position, in our view the imported goods used for the specified purpose, the condition of end use stands complied with. The whole objective of the duty free imported bulk drug is that it should be used in the manufacture of life saving drugs or medicine. In our view, if this condition is fulfilled while the ownership of the goods is with appellant, it can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. The whole purpose of CENVAT credit is to capture all costs so as to evade the cascading effect of duties and taxes. 35. A narrow and a literal interpretation of the phase its manufacturing units should, therefore, be avoided, more particularly when the Registration Exemption Notification provides for authorization for manufacture of goods on behalf of the principal manufacturer. There appears to be no good reason as to why CENVAT credits should not be allowed to be distributed to a job worker in the facts and circumstances of the present case. 36. In this connection reliance can be placed on the decision of the Karnataka High Court in CCE vs. Millipore India Pvt. Ltd. 2012 (26) S.T.R. 514 (Kar.), wherein it was held that if the cost of various services availed forms part of the assessable value of the goods manufactured and sold, there is no reason to deny CENVAT credit of duty and taxes paid on various inputs/ input services availed. The relevant portion of the judgment is reproduced below : 7.5 The principle of law that the services which form a part of the assessable value on which excise duty is discharged, would be available as Cenvat credit has also been accepted by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt concluded that every taxing statue including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly. Further, in case of any ambiguity in a charging section, the benefit must necessarily go in favour of the assessee but the same would not be true for an exemption notification in regard to which the benefit of ambiguity must be strictly interpreted in favour of the Revenue. The Constitution Bench, therefore, answered the reference as follows : 52. To sum up, we answer the reference holding as under- (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subjected to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the Revenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export case (supra) stands overruled. 40. The Supreme Court subsequently in Government of K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute CENVAT credit in respect of the service tax paid on inputs services to its manufacturing units, including a job workers. 43. Such being the position, we also find substance in the contention advanced by learned counsel appearing for the appellant that the amended provisions of rule 2(m) and rule 7 of the CENVAT Rules, after the 01.04.2016, merely seek to rectify the lacuna in the unamended rules and, therefore, would have effect from the inception of the rules. 44. The answer to the first issue referred to by the Division Bench would, therefore, be 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, under rule 7(d) of the CENVAT Rules. 45. In view of the answer to the first issue in favor of the appellant, it would not be necessary to answer the second issue referred by the Division Bench. This issue is whether the appellant would, irrespective of the answer to the first issue, be entitled to avail CENVAT credit when input service is attributed to the goods on whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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