M/s. Godrej Consumer Products Ltd. Versus Commissioner of GST & Central Excise Puducherry
Central Excise
2018 (11) TMI 1196 – CESTAT CHENNAI – 2019 (369) E.L.T. 841 (Tri. – Chennai)
CESTAT CHENNAI – AT
Dated:- 27-8-2018
Appeal Nos. E/40803 and 40804/2017 – Final Order Nos. 42352-42353/2018
Central Excise
Ms. Sulekha Beevi C.S., Member (Judicial) And Shri Madhu Mohan Damodhar, Member (Technical)
Shri Raghaan Ramabhadran, Advocate for the Appellant
Shri K. Veerabhadra Reddy, ADC (AR) for the Respondent
ORDER
Per Bench
The issue involved in both these appeals being same, they were heard together and are disposed by this common order.
2. The appellants are engaged in the manufacture of mosquito repellent coil and are registered with the Central Excise Department. They are availing CENVAT credit on inputs, capital goods and input services used in the manufacture of the finished goods and also on the input services distributed by their Head Office as Input Serv
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
units availing area based exemption were distributed to the appellant unit at Puducherry which according to department is not eligible as it is contravention of the provisions of Rule 2(l) r/w third proviso to Rule 3(4) of CENVAT Credit Rules, 2004. The second issue is that the credit of service tax availed on membership fee for membership in Bombay Gymkhana Club Ltd. is not an input service as defined under Rule 2(l) of CENVAT Credit Rules, 2004 and therefore not eligible. Show cause notice dated 8.12.2011 was issued raising both these allegations. Later, show cause notice dated 18.10.2012 was raised alleging violation of credit distributed on ISD invoices as narrated above. After due process of law, the adjudicating authority confirmed the demand along with interest and also imposed penalties. Hence the appellants are now before this Tribunal.
3. On behalf of the appellant, ld. counsel Shri Raghavan Ramabhadran appeared and argued the matter. He submitted that the units located in
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
he credit has been distributed by the head office as per Rule 7 of CENVAT Credit Rules, 2004. The said Rule does not provide for any pro-rata distribution prior to 1.4.2012. During the disputed period, which is from December 2006 to March 2011, Rule 7 did not provide for pro-rata distribution of credit and whatever credit availed by the units availing area based exemption and distributed to other units is correct and proper. He drew support from the decision of the Hon'ble High Court of Karnataka in the case of Commissioner of Central Excise Vs. ECOF Industries P. Ltd. – 2011 (277) ELT 317 (Kar.) to argue that Rule 7 does not provide any pro-rata distribution prior to 1.4.2012.
3.1 With regard to the issue of credit availed on membership fee for Bombay Gymkhana club, ld. counsel submitted that the same is availed for the activities of business of the company and therefore eligible.
4. The ld. AR Shri K. Veerabhadra Reddy supported the findings in the impugned order. He adverted to pa
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
. 39/2001-Central Excise, dated the 31st July 2001 [GSR 565(E) dated the 31st July 2001];
(iv) No.56/2002-Central Excise, dated the 14th November, 2002 [GSR 764(E) dated the 14th November, 2002];
(v) No.57/2002-Central Excise, dated the 14th November, 2002 [GSR 765(E) dated the 14th November, 2002];
(vi) No.56/2003-Central Excise, dated the 25th June, 2003 [GSR 513(E) dated the 25th June, 2003];
(vii) No.71/2003-Central Excise, dated the 9th September, 2003 [GSR 717 (E) dated the 9th September, 2003];
shall, respectively, be utilized only for payment of duty on final products, in respect of which exemption under the said respective notifications is availed of”
The above proviso clearly shows that the units who avail credit of duty or service tax if availing the area based exemptions shall utilize the credit only for payment of duty on final products in respect of which exemption under the respective notifications has been availed. It is an undisputed fact that various services we
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
there was no restriction as to how much credit can be distributed to each unit. During the relevant period, Rule 7 did not lay down any manner of distribution based on pro-rata basis. The said proviso under Rule 7, during the disputed period read as under:-
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 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.”
6.1 Only with effect from 1.4.2012, Rule 7 has been amended to include that the distribution of credit shall be on pro-rata basis.
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =