Custom, Excise & Service Tax Tribunal
Riello Foods vs The Assistant Commissioner-Thane ... on 24 April, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
WEST ZONAL BENCH
Excise Appeal No. 85083 of 2020
(Arising out of Order-in-Appeal No. PVNS/115/APPEALS
THANE/TR/2019-20 dated 21.08.2019 passed by the Commissioner
of CGST & Central Excise,(Appeals), Thane)
M/s. Riello Foods .....Appellant
Plot No. 4B, Section 3A, Near Hira Ice Factory,
Industries Area, Ulhasnagar
VERSUS
Commissioner of Central Excise, .....Respondent
Thane Rural 3rd floor Aabha Building Vallipeer Road, Thane.
APPEARANCE:
Shri Rinki Arora , Advocate for the appellant Shri P.K.Acharya, Superintendent (AR) for the respondent CORAM:
HON'BLE MR. AJAY SHARMA, MEMBER (JUDICIAL) FINAL ORDER No: 85431/2024 DATE OF HEARING : 02.01.2024 DATE OF DECISION : 24.04.2024 This appeal has been filed by the appellant challenging the impugned order dated 21.08.2019 passed by the Commissioner (Appeals), CGST & Central Excise, Thane by which the learned Commissioner rejected the appeal filed by the appellant and held that ISD credit prior to 31.03.2016 was only to be distributed by the "inputs service distributor" to its own units providing taxable service or manufacturing goods.
2. The issue involved herein is whether the credit distributed by M/s. Parle Biscuit Private Ltd. i.e. 'inputs service distributor' to the appellant, a contractual manufacturer/job worker, for the
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E/85083/2020 period prior to 01.04.2016 is in accordance with Rule 7 of CENVAT Credit Rules, 2004 as prevailing at the relevant time?
3. The facts leading to the filing to the instant appeal are stated in brief as follows. Parle Biscuit Private Ltd. is registered as an "inputs service distributor" under the CENVAT Rules. The confectioneries were being manufactured not only in the factories of Parle Biscuit, but also in the factories of other contractual manufactures like appellant herein. The inputs used by the contract manufacturer or the job-workers for making biscuits are supplied by the "inputs service distributor" i.e. Parle Biscuit which pays for the inputs. The credit on inputs service attributable to the final product was distributed by Parle Biscuit on pro-rata basis proportionately to its own manufacturing plants and also to the contractual manufacturing units / job-workers in accordance with applicable Rules. The appellant herein took credit of the same and utilized the same for payments of duty on the biscuits manufactured for Parle Biscuits. The department being of the view that prior to 01.04.2016 such distribution of input service credit was not permitted to the outsourced manufacturing unit/ Job workers/ Contract manufacturers under rule 7 ibid, issued show cause notice dated 18.04.2018 as to why the inadmissible Cenvat Credit of Rs.3,06,532/- for the period April, 2013 to January, 2015 distributed by input service distributor and availed by the appellant, should not be demanded and recovered and the same was confirmed by Adjudicating authority vide Order-in-Original dated 28.12.2018 alongwith appropriate rate of interest and equal penalty. On appeal filled by the appellant, the learned Commissioner (Appeals) rejected the appeal by upholding the order passed by the Adjudicating Authority.
4. I have heard learned Counsel for the appellant and learned Authorized Representative appearing on behalf of the revenue and pursued the case records including the written submissions as well as case laws place on records by the respective sides.
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E/85083/2020
According to Revenue since the wordings "outsourced
manufacturing unit" has been added only w.e.f 01.04.2016, therefore before the said period, no outsourced manufacturing unit like the appellant herein were permitted to utilise the Cenvat Credit distributed by input service distributor. In order to appreciate the issue involved herein, the relevant portion of Rule 7 ibid before 01.04.2016 and after 01.04.2016 are extracted as under:-
Before 01.04.2016 "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..."
After 01.04.2016 "Rule 7. Manner of distribution of credit by input service distributor.- The input service distributor shall distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or unit providing output service or an outsourced manufacturing units, as defined in Explanation 4, subject to the following conditions, namely... (Emphasis Supplied) xxx xxx xxx Explanation 4. For the purpose of this rule, "outsourced manufacturing unit" means a job-worker who is liable to pay duty on the value determined under rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 on the goods manufactured for the input service distributor or a manufacturer who manufactures goods, for the input service distributor under a contract, bearing the brand name of such input services distributor and is liable to pay duty on the value determined under section 4A of the Excise Act."
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E/85083/2020
Prior to 01.04.2016 also, Rule 7 ibid allows distribution of credit to 'its manufacturing units.' Here the words used are 'its manufacturing units' which, in absence of anything contrary, cannot be said to be limited to 'manufacturing unit' owned by Parle Biscuits only. The first principle of interpretation is that the words used in any statute have to be interpreted without adding any words. The term 'its manufacturing unit' has certainly a wider term to include an outside manufacturing unit or the job worker. Another thing which supports my aforesaid view is the Registration Exemption Notification issued in the year 2001 under Rule 9(2) of Central Excise Rules, 2001 which provides for exemption from registration of the authorised person to manufacture goods on behalf of principal manufacturer. As per the agreement between appellant and Parle Biscuits, they were receiving the raw materials from them and finished goods were processed at their factory with their won labour but Trademarks of Parle Biscuits were cleared on payment of duty to the depot of Parle Biscuits. They were receiving consideration as per the terms of agreement as 'conversion or job charges' per kg of the declared net weight. All these activities were in nature of 'job worker' as envisaged in Board's circular no. 902/22/2009-CX dated 20.10.2009. Appellant had contended that they, being a manufacturing unit of Parle Biscuits, had followed all the procedures and formalities as laid down under the relevant Act, Rules & Notification exempting from the operation of Rule 9 ibid.
5. Number of decisions have been placed on record by the learned Counsel in support of her submission that even prior to 01.04.2016 Rule 7 ibid permitted distribution of credit by the Input Service Distributor even to contract manufacturer or the job worker. I have gone through all the decisions. In my view the issue involved herein is no more res integra in view of those decisions and in particular the reference answered by the Larger Bench of the Tribunal on the very same issue in the matter of the M/S. Krishna Food Products, M/S. Mariamma R Iyer, M/S. Parle Biscuits Pvt Ltd Vs. The Additional Commissioner oF
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E/85083/2020 CGST & C.Ex reported in 2021 (5) TMI 906- CESTAT, New Delhi in which it has been held as under ;-
"35. A narrow and literal interpretation of the phase its manufacturing units should, therefore, be avoided, more particularly when the Registration Exemption Notification provides for authorization for manufacture of goods on behalf of the principal manufacturer. There appears to be no good reason as to why CENVAT credits should not be allowed to be distributed to a job worker in the facts and circumstances of the present case.
xxx xxx xxx
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 could distribute CENVAT credit in respect of the service tax paid on inputs services to its manufacturing units, including a job workers.
43. Such being the position, we also find substance in the contention advanced by learned counsel appearing for the appellant that the amended provision 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 Divisional Bench would, therefore, be that Parle was justified in distributing credits on inputs services attributes to the final product on a pro-rata basis proportionate to the turnover of each unit between the manufacturing plants of 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 favor 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.
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46. The matter may now be placed before the Division Bench for disposal of the appeal."
Later on the Division Bench of the Tribunal vide its Final order no. 51638-51640/2021 dated 7.7.2021 in Appeal nos. E/52692 to 52694/2019 titled as M/s Krishna Foods Products vs. Addl. Commissioner of CGST & CE, allowed the Appeal filed by the appellant - a contractual manufacturer following the Larger Bench decision.
6. Following the aforesaid decision of the Larger Bench of Tribunal some more decisions have been passed by the Co- ordinate Benches on the same lines. Some of those decisions are as under:-
i) 2023 (5) TMI 1129- CESTAT New Delhi ̶ M/S Ajmer Food Products Pvt. Ltd. Versus Commissioner of CGST & Central Excise Jaipur
ii) 2022 (10) TMI 875- CESTAT New Delhi ̶ M/s M.B. Industries Pvt. Limited, M/S Parle Biscuits Pvt. Limited, M.V. Joshi (Deceased), Mariamma Iyer, M/s M.B. Food Pvt.
Limited Versus Commissioner of Central Goods And Service Tax & Central Excise Indore (M.P)
iii) 2022 (10) TMI 1075 - CESTAT New Delhi ̶ M/S Shahi Food Product Versus Commissioner of CGST & Central Excise, Udaipur- Rajasthan
iv) 2022 (10) TMI 1079 - CESTAT New Delhi ̶ M/S Dhananjay Confectioneries Pvt. Ltd. Versus Commissioner Of CGST, Central Excise Customs & Service Tax, Indore
v) 2022 (10) TMI 75- CESTAT New Delhi ̶ M/S Balaji Edibles Pvt. Ltd. Versus Deputy Commissioner Of Customs, CGST & C.Ex, Jabalpur
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vi) 2021 (9) TMI 4 - CESTAT New Delhi ̶ M/S Ajmer Food Products Pvt. Ltd. Versus Commissioner Of CGST & Central Excise Jaipur II
7. Although the revenue has placed on the record the decision in which contrary view has been taken by the Tribunal but those decisions were of period prior to the date of decision by Larger Bench (supra) and therefore, I am afraid that those decisions would be of no help to the revenue.
8. In view of the discussions made hereinabove, I am of the view that M/s Parle Biscuits Pvt Ltd. i.e., the input service distributor has rightly distributed the Credit to the appellant and the appellant is justified in availing the same. Accordingly the impugned order is set aside and the appeal filed by the appellant is allowed.
(Pronounced in open Court on 24.04.2024) (AJAY SHARMA) MEMBER (JUDICIAL) //SR