9911796707
TMI Blog2025 (2) TMI 949X X X X Extracts X X X X X X X X Extracts X X X X ..... of validity of the credit so distributed within the scheme of CENVAT Credit Rules, 2004. The whole of it operates on presumption that the objective of the scheme, viz., restricting the tax liability at each stage in the chain only to the taxable event as set out in section 3 of Central Excise Act, 1944 and section 66/66B of Finance Act, 1994, will be adequately achieved by such distribution. The decision of the Tribunal, in re Clariant Chemicals India Ltd [2015 (10) TMI 2754 - CESTAT MUMBAI], was rendered on the limited issue of applicability of rule 6 in relation to 'exempted services' and owing to which, the Tribunal, finding absence of mechanism for recovery, fell back upon a singularity of the undertakings operated by that particular legal entity. The issue therein was not about the eligibility to take the credit under rule 3 of CENVAT Credit Rules, 2004 but the propriety of retention of the credit in terms of rule 6 of CENVAT Credit Rules, 2004. The impugned order has confirmed the recovery of credit taken, and distributed under rule 7 of CNEVAT Credit Rules, 2004, by the 'input service distributor (ISD)' by subjecting it to scrutiny for eligibility thereof by reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad not taken credit. He further contended that both the discharge of tax liability by the 'provider of service' and availment by the 'input service distributor (ISD)' was not in question and that the challenge was primarily linked to an aspect, viz., nexus between the service so procured and the activity undertaken by them, which was not within the ambit of rule 7 of CENVAT Credit Rules, 2004. This, according to him, traversed beyond the scope of CENVAT Credit Rules, 2004 which stood settled by the several decisions of the Tribunal. According to him, the decision of the Tribunal in Nalco Water India Ltd v. Commissioner of CGST & Excise, Howrah, in final order [no. 75477-75484/2024 dated 8th March 2024] disposing off appeal against order [order-in-appeal no.NOI-EXCUS-001-APP-1355-19-20 dated 24th January 2020] of Commissioner (Appeals) CGST, Noida and in Castrol India Ltd v. Commissioner of Central Excise, Vapi [2013 (291) ELT 469 (Tri.-Ahmd.)], have, in identical circumstances, held that inadmissibility of CENVAT credit can only be challenged in the hands of the 'input service distributor' and 'intermediary invoices' used for such distribution is not covered by the provisions of ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discharged. The scheme itself operates, not for, or under provisions in either statute but under the 'rule-making' power vested with the Central Government in both statues and the taking of credit is set out in the framework of rule 3 of CENVAT Credit Rules, 2004 therein as also the utilization. Such credit has to be taken only by a manufacturer or provider of service to the extent that the inputs/input services so procured are in conformity with conditions set out in rule 4 of CENVAT Credit Rules, 2004. By a special provision, viz., rule 7 of CENVAT Credit Rules, 2004 distribution of credit of service tax paid on input services by 'input service distributor', neither a manufacturer of excisable goods nor a provider of output service, is permitted and, therefore, from not being in a position to utilize the credit so taken. From this, it is apparent that the mechanism provided in rule 7 of CENVAT Credit Rules, 2004, governing the distribution of such credit, deems the credit so distributed to be eligible credit for the purpose of utilization. A harmonious reading of rule 3 and rule 4 of CENVAT Credit Rules, 2004 and the conditions prescribed in rule 7 alone would determine the exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e charging provision and the valuation provision of the taxing statute. In interpreting the various aspects - real, normal and transaction - of value that were subjected to duties before and after 1975 or after 2000, the Hon'ble Supreme Court has held that valuation, being only a measure of the levy, is not controlled by the charging provision and that legislative competence to prescribe the time and extent may accommodate administrative convenience. The decisions in Union of India & others v. Bombay Tyres Ltd [1984 SCR (1) 347] and Commissioner of Central Excise, Indore v. Grasim Industries Ltd [order dated 11th May 2018 in civil appeal no. 3159 of 2004] are seminal enough to warrant, for our purpose, mere reference without alluding to the significant portions. Propriety notwithstanding, and tempting though it may even be to the executive branch of government, the cascading effect of such measure on business, and the ultimate consumer, compelled the incorporation of some neutralizing mechanism. This was the inevitable consequence of expansion of the tax base from itemized, and limited, enumeration of goods with the insertion of a residuary tariff item and the subsequent adoption o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is subject to. It is here that we arrive at the crux. 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 be 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 be 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 defenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence, may have been deliberately obliviated. Notwithstanding all this, the wavering arrow of adjudicatory confirmation to fill the gap will have to be dislodged for that very reason.' in re Metro Shoes Pvt Ltd. Approaching the issue from another angle, the Tribunal in re Hindustan Coca Cola Beverages Pvt Ltd examined other decisions and held thus '4.3 From the facts of the case we are very clear in our mind that the Appellant have availed Cenvat credit on the basis of the invoices distributed the credit by their ISD Registered unit. That being so the admissibility of credit could not have been questioned in respect of individual services which might be referred in any annexure as an end of recipient unit. If any investigation/enquiry was required need to be made at the end of ISD. This view has been held by the Tribunal in various of decisions relevant paragraphs are reproduced below:- a. Godfrey Philips India Ltd. [2009 (239) E.L.T. 323 (Tri.-Ahmd.)]. "4.1 Input service distributor has been defined in sub-rule (m) of Rule 2 and 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 ..... the documents issued by him for distributing the credit viz. (i) the name, address and registration number of the person providing input services and the serial number and date of invoice, bill, or as the case may be, challan issued under sub-rule (1); (ii) the name and address of the said input services distributor; (iii) the name and address of the recipient of the credit distributed; (iv) the amount of the credit distributed. 5. When we look at the functions of the input service distributor and the documents to be issued by him for passing on the credit, it becomes quite clear that the document issued by him for passing on the credit does not contain the nature of service provided and the details of services. It contains the service provider's details, distributor's details and the amount. Obviously the eligibility or otherwise of the service tax credit has to be examined at the end of input service distributor only. This is further supported by the fact that both Central Excise assessees and Service Tax assessees are under the regime of self-assessment and therefore it is the assessee himself who has to specify that the credit availed by him is admissible. Therefore t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 of Cenvat Credit Rules, 2004 have been fulfilled or not. In the absence of any allegation in the show cause notice indicating non-fulfilment of these conditions, no case can be said to have been made out. 6. We find considerable force in the arguments advanced by the learned counsel. It has not been alleged in the show cause notice nor there is finding that the credit distributed against the documents is more than the amount of service tax paid and in any case, this can be verified only at the end of ISD. It is also not the case of the department that credit has been received by the assessee in respect of services/goods which are totally exempted. ..." 4.4 We observe that the present proceedings have arisen out of a statement of demand issued in continuation to the various show cause notice and statement of demands issued to the appellant on the same issue. The show cause notice and some of the statements of demands have been finally adjudged in the favour of appellant without appeal being preferred by the revenue. This being a statement of demand no new ground has been stated in the statement of demand. Thus when revenue accepts the earlier decisions dropping the show cause ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
