Custom, Excise & Service Tax Tribunal
K N Food Industries Pvt Ltd vs Cgst & Ce Kanpur on 16 January, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
(E-Hearing)
Excise Appeal No.70720 of 2018
(Arising out of Order-In-Appeal No. 175-COMMR-A-ST-APPL-KNP-2018, dated
-20/03/2018 passed by Commissioner (Audit), Central Tax & Central Excise,
Kanpur)
M/s K N Food Industries Pvt. Ltd. .....Appellant
(E-35 Industrial Estate Panki Site No-iii
Kanpur, UP 208022)
VERSUS
Commissioner, CGST & Central Excise, Kanpur
....Respondent
(117/7, Sarvodaya Nagar, Kanpur) APPEARANCE:
Ms. Rinki Arora, Advocate & Shri Mayur Jain, Advocate for the Appellant Shri Santosh Kumar, Authorized Representative for the Respondent CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NO.-70019/2025 DATE OF HEARING : 01.08.2024 DATE OF DECISION : 16.01.2025 P. K. CHOUDHARY:
The present appeal has been filed by the Appellant assailing the impugned Order-In-Appeal No. 175-COMMR-A-ST- APPL-KNP-2018, dated-20.03.2018 passed by Commissioner (Audit), Central Tax & Central Excise, Kanpur.
2. The facts of the case in brief are that the Appellant had undertaken manufacture of Parle Branded confectionaries as Contract Manufacturing Unit (CMU) on behalf of the principal M/s Parle Biscuits Pvt. Ltd. The activity of manufacture undertaken is as per clause (ii) of Notification No.36/2001-CE(NT) dated 26.6.2001 for which an authorization dated 17.4.2009 as 2 Excise Appeal No.70720 of 2018 required under said Notification has been filed with the jurisdictional ACCE. As per clause (ii) of Notification No.36/2001-CE(NT), the inputs, capital goods were procured by M/s Parle Biscuits Pvt. Ltd., the principal manufacturer, which were received in factory of Appellant directly from the manufacturer-suppliers on payment of excise duty for use in manufacture of confectionaries on behalf of principal.
3. In the Show Cause Notice1 dated 03.05.2014, the allegation is that Cenvat Credit of Rs.16,04,120/- availed on ISD invoices of Principal Manufacturer M/s Parle Biscuits (P) Ltd. Mumbai during the period from April 2013 to September 2013 is in contravention of erstwhile Rule 7 of CCR,2004 which allows distribution of cenvat credit by ISD to its manufacturing unit as the assessee is a separate entity and not a unit of Parle, hence proposal for recovery of wrongly availed cenvat credit along with interest and penalty was made.
4. In Order, the Adjudicating Authority has mentioned that as per Rule 7, it is clear that the Appellant was not eligible to take credit on invoices issued by ISD Parle Products as the Appellant is a CMU/job-worker of Parle as evident from the authorization and not its own manufacturing unit.
5. Relying upon the judgement of the Tribunal in Sunbell Alloys Co. of India Ltd. V/s Commr. of C. Ex., Belapur reported at 2013 (30) S.T.R. 211 (Tri.-Mumbai) it is observed that credit is not distributable to Appellants.
6. In Order-in-Appeal, the Commissioner (Appeals) has mentioned that appellant are not eligible for availing credit as they are not the manufacturing unit of the ISD i.e. Parle Biscuits.
7. Hence the present appeal before the Tribunal.
1SCN 3 Excise Appeal No.70720 of 2018
8. The learned Advocate appearing on behalf of the Appellant submits that the Appellant is manufacturing final products - namely Parle branded Confectioneries namely Mango bite and Kismi Toffee undertaken by Appellants is on behalf of principal M/s Parle Biscuits Pvt. Ltd. under clause (ii) of Notification No.36/2001-CE(NT) dated 26.06.2001 wherein inputs are converted into finished goods /final products - Confectioneries which are packed in wrappers /corrugated boxes and despatched on payment of duty on behalf of principal manufacturer M/s Parle Biscuits Pvt. Ltd. to their depots for sale. The entire manufacturing activity is undertaken by Appellants as Contract Manufacturing unit (CMU) and not just a job-worker to carry out some process as fully manufacturing process on final product is carried-out by Appellant on behalf of principal and duty paid on Retail Sale Price under Section 4A of CEA.
9. In order to promote the sale of final products advertising and sales promotion services were availed at corporate office of principal/ISD. In regards to the same, the advertising agencies rendered services and raised invoices of service charges and service tax incurred by principal. The said credit was distributed to the CMU's via ISD invoices.
10. Only Proportionate credit based on turnover of the Appellant was distributed to Appellant. The confectioneries manufactured on behalf of principal manufacturer are cleared from the factory under excise invoice which is in the Appellant's name.
11. The definition of 'input service distributor' under Rule 2(m) of CCR 2004 means office of manufacturer of final products which receives invoices towards purchase of input services for distribution of credit 'to such manufacturer' read with Rule 7 allowing distribution of credit to 'manufacturing unit', the credit taken is not deniable.
4 Excise Appeal No.70720 of 201812. The office of the ISD M/s Parle Biscuits Pvt. Ltd. and the Appellant is one and same. Moreover, final products Confectioneries manufactured at Appellant's factory for M/s Parle Biscuits Pvt. Ltd. have used for input service of advertisement /sale promotion, hence credit passed on through ISD invoices is admissible.
13. The learned Departmental Representative appearing on behalf of the Revenue has justified the impugned order and prayed that the appeal filed by the Appellant being devoid of any merits be dismissed.
14. Heard both the sides and perused the appeal records.
15. Having considered the rival contentions, we find that the issue herein is squarely covered in favour of the Appellant by the Larger Bench ruling of this Tribunal in the case of Krishna Food Products (supra). Under similar facts and circumstances, the Division Bench of this Tribunal had referred the following questions for consideration by the Larger Bench:-
"(i) Whether issuance of Input Service Distributors‟ invoice by Parle to its contract manufacturing unit is legal and correct when the contract manufacturing is carried out in terms of Notification No. 36/2001-CE (NT). (ii) Irrespective of the position that whether issuance of Input Service Distributors‟ invoice by Parle to Krishna is correct or otherwise, whether Krishna still is entitled for cenvat credit when the input service is attributed to the goods on which excise duty is paid includes the cost of services on which credit was taken.
16. The Larger Bench have answered the questions as follow:-
"41 As noticed above, CENVAT is a beneficial scheme with the stated purpose of allowing CENVAT credit of all taxes paid on inputs and services so as to avoid cascading effect of taxes and duties. 42 Thus, even in terms of the provisions of Rule 2(m) and Rule 7 of the CENVAT Rules, as they stood prior to 01.04.2016, the appellant company can distribute CENVAT credit in respect of the service tax paid on inputs services to its manufacturing units, including a job worker.5 Excise Appeal No.70720 of 2018
43 Such being the position, we also find substance in the contention advance by learned Counsel appearing for the appellant that if 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 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 favour 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 which excise duty is paid and includes the cost of services on which credit was taken.
46. The matter may now be placed before the Division bench for disposal of the appeal."
17. In view of the aforementioned view expressed by the Larger bench on the very same question, we follow the same and allow the appeal and set aside the impugned order. Accordingly, the appeal filed by the Appellant is allowed with consequential relief.
(Pronounced in open court on 16.01.2025) Sd/-
(P. K. CHOUDHARY) MEMBER (JUDICIAL) Sd/-
(SANJIV SRIVASTAVA) MEMBER (TECHNICAL) Nihal