Custom, Excise & Service Tax Tribunal
Cce Pune I vs Mahindra &Amp; Mahindra Ltd on 24 October, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT No. I
APPEAL No. E/457/2011
(Arising out of Order-in-Original No. 20/CEX/2010 dated
30.11.2010 passed by Commissioner of Central Excise, Pune-I)
Commissioner of Central Excise, Pune-I Appellant
Vs.
Mahindra & Mahindra Ltd. Respondent
Appearance:
Ms. A.S. Parab, Assistant Commissioner (AR), for appellant Ms. Manasi Patil, Advocate, for respondent CORAM:
Hon'ble Mrs. Archana Wadhwa, Member (Judicial) Hon'ble Mr. Sanjiv Srivastava, Member (Technical) Date of Hearing: 11.10.2018 Date of Decision: 24.10.2018 ORDER No. A/87757/2018 Per: Mrs. Archana Wadhwa Being aggrieved with the order passed by the Commissioner, vide which he has dropped the demand of duty of Rs.3,98,38,092/- raised against the respondents for the period October 2007 to February 2010, Revenue has filed the present appeal.
2. After hearing both the sides duly represented by Ms. A.S. Parab, Assistant Commissioner (AR) for the 2 E/457/2011 Revenue and Ms. Manasi Patil, Advocate, for the respondents, we find that the respondents are engaged in the manufacture of D.G. sets and D.G. engines falling under Chapter 84 and 85 of the Central Excise Tariff Act. They availed the cenvat credit of service tax paid on various input services availed by their head office located at Kandivali, Mumbai, which was registered as ISD under Rule 4(A) of the Service Tax Rules.
3. Revenue by entertaining the view that such services were availed at the assessee's head office and were pertaining to the erection, installation, commissioning services, which were not having any connection with the assessee's manufacturing activities, proceedings were initiated against them and for denial of the credit by way of issuance of show cause notice raised for the period October 2007 to February 2010. While adjudicating the said show cause notice, the Commissioner observed as under:-
"6.2 From the above, it can be seen that the input service distributor can distribute any input credit to its manufacturing units or units providing output services subject to the conditions that (i) that the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon;
(ii) credit of service tax attributable to service use in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed. There is no such allegations in the SCN on 3 E/457/2011 the above two grounds. Further, there is also no dispute that the Assessee's HO is registered under ISD services. By going through the provisions contained in the above rule, the intention of the legislature is that any input service credit availed by ISD can be distributed to its manufacturing units or units providing output services irrespective of whether those services would be used in or in relation to manufacture or providing output services or not. The idea behind in introducing the ISD provision in CCR is that input service credit earned by HO or by any manufacturing units or any units providing output services of the same group which are engaged in the manufacture of dutiable goods/output services. Another prohibition is that the input service credit should not exceed the credit availed by the ISD under invoice. The above view has been fully supported by the decision of Hon'ble Tribunal Bangalore in the case of M/s. ECOF Industries Pvt. Ltd.
Vs. CCE, Bangalore, 2010 (17) STR 515 (Tri-Bang). In the above decision the issue involved was that the department objected the distribution of service tax credit earned in one of the unit to the other unit of the same group. By analyzing the provisions contained in Rule 7 and the para 2.3 of the master circular dated 23.8.2007, the Hon'ble Tribunal held that subject to conditions mentioned in the above Rule there is no restriction for ISD to distribute input service credit to its any of the manufacturing unit. But in the instant case the input service credit was earned by HO of the Assessee. When credit earned by one manufacturing unit could be allowed to be utilized by another unit (as held by Hon'ble Tribunal), the present issue involving availment of input service credit, earned by Assessee's own HO, by the Assessee is well within the provision contained in Rule 7 of CCR 2004. In short, any input service credit availed by ISD can be distributed by ISD to its manufacturing unit or unit providing output 4 E/457/2011 services. Accordingly, the repair & maintenance services and erection and commissioning services, on which credit earned by the Assessee's HO, which are distributed to the Assessee, cannot be denied. 7.0 The SCN alleges suppression of facts on the part of Assessee. Whereas from the documents produced by the Assessee such as ER-1 returns, the particulars of availment or input service credit from input service credit distributors had been furnished. As rightly pointed out by the Assessee, the department could have called further details then and there which has not been done. Therefore, the allegation of suppression is also not sustained. However, the Assessee has already succeeded on merit." The said order of the Commissioner is impugned before us.
4. The short issue required to be decided is whether the invoices issued by the assessee's head office, which is also registered as ISD, can be held to be eligible cenvatable invoices, even if the same relate to various services received at the head office and is not connected with the assessee's manufacturing unit. We find that the issue is no more res integra and stands settled by the Tribunal's decision in the case of ECOF Industries Pvt. Ltd. vs. CCE, Bangalore - 2010 (17) STR 515 (Tri.- Bang.). It stands held by the said decision that the distribution of credit by input service distributor to a unit where the services were not availed, cannot be 5 E/457/2011 question in terms of Rule 7 of the Cenvat Credit Rules, 2004 and the Master Circular dated 23.8.2007, as long as the credit does not exceed the amount of tax paid and should not be attributable to the services used in manufacture of exempted goods or providing exempted services. Admittedly, in the present case, the assessee's final product is neither exempted nor the credit stands availed in excess of the tax paid. The said decision of the Tribunal stands upheld by the Hon'ble Karnataka High Court, when the appeal filed by the Revenue was rejected, reported as CCE, Bangalore-I vs. ECOF Industries Pvt. Ltd. - 2011 (271) ELT 58 (Kar.).
5. Inasmuch as the issue stands decided by the above referred decisions, we find no justification to interfere in the impugned order of the Commissioner. Accordingly, the appeal filed by the Revenue is rejected.
(Pronounced in court on 24.10.2018) (Sanjiv Srivastava) (Archana Wadhwa) Member (Technical) Member (Judicial) tvu