Custom, Excise & Service Tax Tribunal
M/S Sun Pharma Medications Pvt. Ltd vs Commissioner Of C.Ex. & S.Tax on 9 November, 2016
In the Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad Appeal No.E/13193/2013-SM [Arising out of OIA No.SRP/141/Vapi/2013-14, dt.05.06.2013, passed by Commissioner (Appeals), C.Ex. & S.Tax, Vapi] M/s Sun Pharma Medications Pvt. Ltd. Appellant Vs Commissioner of C.Ex. & S.Tax, Vapi Respondent
Represented by:
For Appellant: Shri A. Chordiya, Advocate For Respondent: Shri Alok Srivastava, A.R. For approval and signature:
Honble Dr. D.M. Misra, Member (Judicial)
1. Whether Press Reporters may be allowed to see the No Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen the order?
4. Whether order is to be circulated to the Departmental Yes authorities?
CORAM:
HONBLE DR. D.M. MISRA, MEMBER (JUDICIAL) Date of Hearing: 14.10.2016 Date of Decision: 09.11.2016 Order No. A/11516/2016, dt.09.11.2016 Per: Dr. D.M. Misra This is an appeal filed against OIA No.SRP/141/Vapi/2013-14, dt.05.06.2013, passed by Commissioner (Appeals), C.Ex. & S.Tax, Vapi.
2. Briefly stated the facts of the case are that the Appellants are engaged in the manufacture of P.P. Medicines falling under Chapter 30 of Central Excise Tariff Act, 1985. They had availed CENVAT Credit, amounting to Rs.1,39,055/- during the month of September 2006, on the basis of invoices issued by their head office registered as input service distributor. Alleging that since the input services viz. security service, general insurance service, consultancy engineering services were received at their Sikkim unit, having no nexus with manufacturing at their Dadra unit, therefore, not eligible to CENVAT Credit being fall outside the scope of definition of input service prescribed at Rule 2(l) of CENVAT Credit Rules 2004, a Show Cause cum demand notice was issued to them on 08.09.2011 for recovery of credit with proposal for imposition of penalty. On adjudication, the demand was confirmed and penalty of equal amount imposed. Aggrieved by the said order, the Appellants preferred an appeal before the learned Commissioner (Appeals), who in turn, rejected their appeal. Hence, the present appeal.
3. The learned Advocate for the Appellant submitted that they have availed CENVAT Credit on the basis of invoice issued by their head office, which was registered as an input service distributor under the relevant provisions of Service Tax Rules, 1994. It is his contention that during the relevant time, it was not a condition precedent to avail credit on the basis of invoices issued by the input service distributor, to receive and utilize the service, where the activity of manufacture took place. It is his contention that the Appellants had complied with all the conditions before availing the CENVAT Credit on the invoices issued by their head office in distributing the credit in accordance with Rule 7 of CENVAT Credit Rules, 2004, hence, the credit cannot be denied to them. In support, the learned Advocate placed reliance on the judgment of Hon'ble Karnataka High Court in the case of CCE Bangalore-I Vs ECOF Industries Pvt. Ltd 2011 (23) STR 337 (Kar). Further, he has submitted that the demand is barred by limitation inasmuch as in the relevant ER-1 monthly return, the Appellant had informed about availing of such credit to the Department and no facts had been suppressed from the knowledge of the Department, therefore, the demand notice issued in 2011 for recovery of the credit availed in September 2006 is clearly barred by limitation.
4. The learned Authorized Representative for the Revenue reiterates the findings of the learned Commissioner (Appeals). He has submitted that the credit availed on various input services requires to have nexus with the manufacture and clearance of final product from the place of removal. In the present case, these services had been availed at Sikkim unit, which had no nexus with the manufacturing activity undertaken at Dadra unit. Accordingly, CENVAT Credit cannot be held admissible to the Appellant. The learned Authorized Representative place reliance on the Stay Order of the Tribunal in the case of M/s Hindalco Industries Vs CCE Allahabad 2013 (292) ELT 416 (Tri-Del).
5. Heard both sides and perused the records.
6. Undisputedly, the Appellants on the basis of invoices issued under Rule 4A of Service Tax Rules, 1994 by their head office registered as an input service distributor availed CENVAT Credit at their manufacturing facility at Dadra unit. It is also not in dispute that the entire credit relates to the input services viz. security service, general insurance service, consultancy engineering services received and utilized at their Sikkim unit. It is the contention of the Appellant that as per the existing provisions during the relevant period, there was no necessity that the input services be received and utilized in the factory of the manufacturer where CENVAT Credit was availed. The Appellants have heavily placed reliance on the judgment of Hon'ble Karnataka High Court in the case of ECOF Industries Pvt. Ltd. In the said case, the Hon'ble High Court was confronted with the question whether the invoices issued by the head office at Chennai in respect of the services received at one unit, in favour of other unit, would be eligible to CENVAT Credit. Their lordships, after interpretation of scope of input service and input service distributor, observed as follows:-
8.?It is in this context, the definition of input service distributor makes it clear that a manufacturer or a producer of a final product or a provider of output service may have more than one unit and may be distributed in various parts of the country. It is in this background the definition of service distributor is defined as office of the manufacturer or producer of a final product or provider of output service which receives invoices issued under Rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider, as the case may be. Therefore, the law mandates that the manufacturer who wants to avail the benefit of this service tax if he has more than one unit he should also get registered himself as a service provider and then, he would be able to collect all the input service tax paid in all its units and accumulate them at its head office and distribute the said credit to its various units. (Emphasis supplied) At the time of distribution, the manner of distribution is provided in Rule 7 which reads as under :-
Rule 7.?Manner of distribution of credit by input service distributor. The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following conditions, namely :-
(a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon, or
(b) 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. Therefore, only two limitations are put for the distribution of credit by an input service distributor. Firstly, it cannot exceed the amount of service tax paid and secondly, the credit of service tax attributable to service used shall not be distributed in a unit exclusively engaged in the manufacture of exempted goods or providing of exempted services.
9.?In fact, the Board has issued a circular clarifying in this regard, which is extracted by the tribunal at para 7 which reads as under :-
Para 7.?Para 2.3 of the Master Circular referred to by the ld. Advocate reads as under :-
2.3.- ?An Input service distributor is an office or establishment of a manufacturer of excisable goods or provider of taxable service. It receives tax paid invoices/bills of input services procured (on which Cenvat credits can be taken) and distributes such credits to its units providing taxable services or manufacturing excisable goods. The distribution of credit is subject to the conditions that - (a) the credit distributed against an eligible document shall not exceed the amount of service tax paid thereon, and (b) credit of service tax attributable to services used in a unit either exclusively manufacturing exempted goods or exclusively providing exempted services shall not be distributed. An input service distributor is required (under Section 69 of the Act, read with Notification No. 26/2005-S.T.) to take a separate registration.
10.?Therefore, these are the only two limitations, which are imposed in Rule 7 preventing the manufacturer from utilizing the CENVAT credit, otherwise, he is entitled to the said credit. Merely because the input service tax is paid at a particular unit and the benefit is sought to be availed at another unit, the same is not prohibited under law. It is in this context, the manufacturer is expected to register himself as a input service distributor and thereafter, he is entitled to distribution of credit of such input in the manner prescribed under law. (Emphasis provided). Therefore, the order passed by the tribunal is legal and valid and does not suffer from any legal infirmity and does not call for any interference and therefore it is dismissed.
7. I find that the present circumstances are more or less similar to the facts of the above case. In these circumstances, I do not see any reason not to follow the aforesaid judgment of Hon'ble Karnataka High Court in ECOF Industries Pvt. Ltds case (supra).
8. In the result, the impugned order is set aside and the appeal is allowed with consequential relief, if any, as per law.
(Pronounced in Court on 09.11.2016) (Dr. D.M. Misra) Member (Judicial) cbb 6