Custom, Excise & Service Tax Tribunal
Covestro India Pvt Ltd vs Vadodara-Ii on 23 October, 2024
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Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
REGIONAL BENCH- COURT NO. 2
Excise Appeal No. 10348 of 2021
(Arising out of OIA-VAD-EXCUS-002-APP-235-2020-21 Dated-31/03/2021 passed by
Commissioner of Central Excise, Customs and Service Tax-VADODARA-I)
COVESTRO INDIA PVT LTD .....Appellant
Plot No 3501 To 3515 6301 To 6313
And 16 Mtr Road / B2 Gidc Industrial Estate
Ankleshwar, Ankleshwar, Gujarat
VERSUS
C.C.E. & S.T.-VADODARA-II .....Respondent
1st Floor... Room No.101, New Central Excise Building, Vadodara, Gujarat-390023 APPEARANCE:
Shri. Vinay Kansara, Advocate for the Appellant Shri. N.P. Makwana, Superintendent (AR) for the Respondent CORAM: HON'BLE MEMBER (TECHNICAL), MR. C.L. MAHAR Final Order No. 12474 / 2024 DATE OF HEARING:16.10.2024 DATE OF DECISION:23.10.2024 C.L. MAHAR The brief facts of the matter are that the appellant are engaged in manufacture of the excise goods and have availed Cenvat Credit on goods and services used in the manufacture of excisable goods. The appellant have availed input service credit of the common input credit of various input services distributed by their Head Office situated at Thane (Mumbai).
2. During the course of the audit by the department of the financial records of the appellant's head quarters at Than, it has been noticed by the department that their head quarter office has distributed the input service credit amounts to three units located at :-
i. Ankleshwar, Dist. Bharuch, (Gujarat Plant) ii. Semmankuppan (Tamil Nadu plant) iii. Surajpur, Guatam Budha Nagar (Uttar Pradesh plant)
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3. The Department is of view that since the appellants Head Office is who providing output service, the Head Office of the appellant has not proportioned input credit going for providing output service at cleared and therefore distribute the input service credit amounts three units in excess. Without including the output service provided by their head quarters. The department entertained the view that they have distributed excess credit to their respective three clients as listed above.
4. In view of the above premises a show cause notice dated 15.06.2020 came to be issued demanding reversal of excess input service credit of Rs. 26,67,661/- by invoking the provisions of Rule 14 of Cenvat Credit Rules, 2004 read with Section 111A(4) of the Central Excise Act, 1994, interest and penal provisions has also been invoked. The matter has reached up to the level of Commissioner (Appeals), however, the appellant did not succeeded as the Learned Commissioner (Appeals) vide his order dated 31 March, 2021 have confirmed the reversal of Cenvat Credit availed by them.
5. I have heard both the sides. I take note of the fact that the show cause notice on the similar issue were also issued to the appellant is other units situated at Tamil Nadu and Uttar Pradesh. The matter have already been decided by the Division Bench of this Tribunal at Allahabad vide their Final Order No. 70324/2024 dated 14th March, 2024 wherein, the appeal of the appellant has been allowed by this Tribunal. I find that the matter is no longer res Integra as the issue has already been decided by this Tribunal in the appellant's own case on the same issue. The relevant extract of the same is reproduced below:
4.2 The only issue that has to be decided in the present case is whether the disallowance of credit in the hands of the appellant which was distributed by their Head Quarter at Thane as Input service distributor is correct or otherwise.
4.3 We find that exactly the same issue in case of Appellant's Tiruchirapalli unit has been decided by the Chennai Bench vide Final Order No 40021/2023 dated 31.03.2023 [2023-TIOL112-CESTAT-MAD], observing as follows 7.1 The lower authorities have pressed into service Rules 3 and 7 of the CCR, 2004 to disallow and recover the CENVAT Credit availed by the recipient-
appellant unit, but however, when the audit took place at the Head Office unit, which is the ISD unit, nothing is placed on record as to whether any Show Cause Notice was issued to the said unit which chose to distribute (to which Rule 7 of the CCR applies) alleging that the distribution by the ISD was wrong. There is also nothing brought out on record if the appellant, being a recipient unit, had any role or influence in the manner of distribution so that a case of wilful suppression with an intention to evade payment of duty, etc., could be justified. When the appellant took consistent stand inter alia that its Head office-ISD unit was regularly filing its ER-1 return, that the service provider unit at Head Office had Service Tax liability every year, which was paid in cash and that the entire tax liability was paid in cash every year rather than paying through the CENVAT Credit, the lower authorities have not denied anywhere the above facts. There is also no denial by the lower authorities that the amount of tax paid in cash by the Head Office unit was much more
3|Page E/10348/2021 -SM than the amount of credit that should have been distributed to the Head Office unit, which fact stood duly verified even during the audit. This is, therefore, clearly a revenue neutral situation since there is no Revenue loss at all to the Government and hence, the question of wilful suppression, that too with an intent to evade payment of tax, etc., would never arise.
7.2 I find that the co-ordinate Mumbai Bench of the CESTAT in the case of M/s. Oerlikon Balzers Coating India Pvt. Ltd. v. Commissioner of Central Excise, Pune-II [2017 (4) G.S.T.L. 62 (Tri. - Mumbai)] in its Final Order has, under similar circumstances, held as under:-
5. We find that the services on which Cenvat credit has been availed are being used for providing output services is not in dispute. If at all Pune unit of the appellant distributes this credit to various other units on pro rata basis Cenvat credit was available to the other units also and it is also not in dispute that during the period the other units were also discharging service tax liability in cash also. Therefore, the entire exercise would have been revenue neutral. Hence we hold that rejecting the claim of Cenvat credit of the appellant is unsustainable and liable to be set aside and we do so."
The Hon'ble Bombay High Court, thereafter, vide its judgement against the above order of CESTAT Mumbai [2019 (366) E.L.T. 624 (Bom.)], has upheld the above order of the Tribunal and the Hon'ble Court has also looked into the amended Rule 7 of the CCR.
8. Further, I also find that in the following cases, it has been held that recovery / demand cannot be raised at the recipient's end:-
(i) M/s. V.G. Steel Industry v. Commissioner of Central Excise [2011 (271) E.L.T. 508 (P & H)];
(ii) M/s. Titan Industries Ltd. v. Commissioner of Central Excise & Service Tax, Chennai [2019-TIOL2525-CESTAT-MAD]
9. It is also the settled position of law that the Show Cause Notice in the case on hand has been served beyond the normal period, for which the only allegation levelled is wilful suppression with an intent to evade tax, but however, no supporting document/evidence is placed on record to justify suppression by the appellant, who is only a recipient, and consequently, the demand also cannot sustain being hit by time-bar. The following judgements / orders support my above view:-
(i) Commissioner of Central Excise v. M/s. Dashion Ltd. [2016 (41) S.T.R. 884 (Guj.)];
(ii) M/s. Titan Industries Ltd. v. Commissioner of Central Excise & Service Tax, Chennai [2019-TIOL2525-CESTATMAD]
10. It is clear from the facts as borne out of the records and also as forthcoming from the orders of lower authorities that a mere allegation has been made as to the wilful suppression with an intent to evade tax which, if considered for the sake of arguments, may at the most justify invoking the extended period of limitation. But in any case that alone is not sufficient since the Department has to prove that there is a revenue loss to the exchequer. The above arguments would remain so because the Department was aware of both sides of the coin, that is to say, they came to know of input service distribution by the ISD unit in the particular manner when they conducted audit there. This means that they are aware of the distribution of input credit in the particular manner. When this is the situation, then there is no question of suppression, much less of any receipt of the input credit by the appellant.
11. In view of the above discussions, I am of the clear view that the disallowance of CENVAT Credit in the hands of the recipient-appellant, as confirmed in the impugned order, is incorrect and not sustainable in the eye of law, for which reason the impugned order is set aside.
4.5 In view of the decision of the Chennai Bench which squarely is applicable to the facts of present case we do not find any merits in the impugned order.
5.1 Appeal is allowed
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5.1 Following the above decision of this Tribunal in the appellants own
case on the same issue I decide that impugned order in appeal is devoid of any merit and therefore, I set aside the same.
6. Appeal is accordingly allowed.
(Pronounced in the open court on 23.10.2024) (C.L. MAHAR) MEMBER (TECHNICAL) PRACHI