2018 (11) TMI 1196 – CESTAT CHENNAI – TMI – Distribution of CENVAT Credit – area based exemption – the input service credit eligible / availed by units availing area based exemption were distributed to the appellant unit at Puducherry which according to department is not eligible – Held that:- In the present case, the appellant has availed the credit on ISD invoices distributed by their Head Office. To such availment or utilization of credit by appellant, the proviso to Rule 3(4) does not apply at all – the demand raised alleging that the appellant has violated provisions of Rule 2(l) r/w proviso to Rule 3(4) cannot sustain.
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CENVAT Credit – input service – membership fee for membership in Bombay Gymkhana Club Ltd. – Held that:- Such membership fee paid by the appellant does not have any nexus with their manufacturing activity – credit not allowed – demand upheld.
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Appeal allowed in part. – Appeal Nos. E/40803 and 40804/2017 – Final Order Nos. 42352-42353/2018 – Dated:- 27-8
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6/2002-CE dated 14.11.2002. According to department, in terms of third proviso to Rule 3(4) of CENVAT Credit Rules, 2004, the CENVAT credit of duty and service tax paid on the inputs or input services used in the manufacture of final products cleared after availing of the exemption under the above notifications shall be utilized only for payment of duty of final products in respect of which the exemption under the said notification is availed. Through ISD invoices issued by their Head Office, the appellants availed credit of service tax paid on input services consumed by the units availing area based exemption. Thus, the input service credit eligible / availed by 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 f
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sed on ISD invoices to the appellant unit situated at Puducherry. The input services which were used commonly by all the units including the units availing area based exemption were distributed by the head office, which is registered as ISD. The demand has been confirmed on wrong and erroneous interpretation of third proviso to Rule 3(4) of the CENVAT Credit Rules, 2004. The said proviso does not restrict availment of credit by units availing the area based exemption. It only restricts utilization of the credit. As per the show cause notice, the department alleges wrong availment of credit by appellant which is distributed by their head office as per ISD invoices. The 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 av
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), the appellants are not eligible for credit and the demand raised is legal and proper. 5. Heard both sides. 6. For better appreciation, proviso to Rule 3(4) is reproduced as under:- Provided further that the CENVAT credit of the duty, or service tax, paid on the inputs, or input services, used in the manufacture of final products cleared after availing of the exemption under the following notifications of Government of India in the Ministry of Finance (Department of Revenue):- (i) No. 32/99-Central Excise, dated the 8th July 1999 [GSR 508(E) dated 8th July 1999]; (ii) No. 33/99-Central Excise, dated the 8th July 1999 [GSR 509(E) dated 8th July 1999]; (iii) No. 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
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ling the exemption as per the notification. The department lays stress on the word ―shall be utilized only‖ and has raised the demand alleging that the credit on input services which have been availed by all the units cannot be distributed by the head office on the premise that the area based exemption units have to utilize the credit only for payment of duty of final products to which the area based exemption applies. Interestingly, the show cause notice is not issued to such units who have availed area based exemptions. The appellant situated in Puducherry has availed credit on the ISD invoices issued by their Head Office. Prior to 1.4.2012 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 in
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, the proviso to Rule 3(4) does not apply at all. We therefore are of the view that the demand raised alleging that the appellant has violated provisions of Rule 2(l) r/w proviso to Rule 3(4) cannot sustain and requires to be set aside, which we hereby do. 6.2 The demand of ₹ 1,86,113/- has been raised alleging that the appellant has availed credit on membership fee of Bombay Gymkhana Club Ltd. and that these are not eligible input services. After perusing the records, we agree with the view taken by the authority below as we find that such membership fee paid by the appellant does not have any nexus with their manufacturing activity. The demand raised on this ground is therefore upheld without any interference. 7. From the above discussions, we hold that the impugned order is set aside except to the extent of upholding disallowance of credit of service tax paid on membership fee. The appeals are partly allowed in the above terms, with consequential benefits, if any. (Operative p
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