M/S.Raymond Ltd vs Cce, Indore

[Arising out of Order-in-Appeal No.IND/CEX/000/APP/188/12 dated 26.07.2012/01.08.2012 passed by the Commissioner (Appeals), Customs & Central Excise, Indore]

For approval and signature:

HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

M/s.Raymond Ltd. Appellant

Vs.

CCE, Indore  Respondent

Present for the Appellant : Shri Manoj Chauhan, C.A.

Present for the Respondent: Shri G.R. Singh, D.R.

Coram: HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)

Date of Hearing/Decision: 18.09.2015

FINAL ORDER NO. 54085/2015

PER: S.K. MOHANTY

The brief facts of the case are as under:-

1.2 The appellant is engaged in the manufacture of bars and rods falling under Chapter 72 of the Central Excise Tariff Act, 1985. The appellant has two manufacturing units viz. Unit I & Unit II. The unit II of the appellant is the job worker for carrying out certain job work activities. Unit II has rendered certain services viz. construction and maintenance/repair service. But the credit attributable to such service was taken in the books of accounts of Unit - I. Taking of such credit in the books of Unit I was disputed by Central Excise Department on the ground that though the service tax invoices are in the name of unit II but the credit has been taken in the books of Unit I, which is not in conformity with the cenvat statute. The proceedings initiated in this regard culminated in the adjudication dated 19.01.2012, wherein cenvat credit taken in the books of Unit I to the tune of Rs.6,16,403/- was disallowed and equal amount of penalty was imposed. In appeal, the Commissioner (Appeals) vide the impugned order has upheld the adjudication order. Hence this present appeal is before this Tribunal.

3. Shri Manoj Chawla, the ld. Chartered Accountant appearing for the appellant submits that both the Unit I and II are under the umbrella of Raymond Ltd. which is a company incorporated under Companies Act, 1956 and the unit II is undertaking the job work activities for the Unit I and the finished goods manufactured in the Unit I is removed from the factory on payment of appropriate Central Excise Duty. He referred to Rule 2 (m) and 7 of the Cenvat Credit Rules, 2004 to substantiate his stand that input service distributor can distribute the credit among its manufacturing units for the purpose of taking cenvat credit. To substantiate such stand, the ld. Chartered Accountant has relied on the decision of this Tribunal in the case of Greaves Cotton Ltd. Vs. Commissioner of Central Excise, Chennai-II & IV reported in 2014 TIOL 1519-CESTAT-MAD.

4. He further submits that both the units of the company are maintaining adequate records to demonstrate that the input service has been received in any two units and the credit taken by Unit I has been utilized for payment of Central Excise duty on the manufacturer of goods. It is his contention that the expenses incurred for the disputed service have been taken in the books of accounts as a cost and since the books of accounts and the balance-sheet are common for both the units, the credit shall not be denied.

5. Per-contra, Shri G.R. Singh, the ld. D.R. for the respondent submits that Rule 3 of the Cenvat Credit Rules entitles a manufacturer to take the cenvat credit, if the input service is received by the manufacturer. He, further submits that since the invoices were in the name of unit II and the cenvat credit was taken by the Unit I, without following the procedures prescribed in Notification No.214/86 dated 25.03.1986, the appellant shall not be eligible to take cenvat credit on service tax paid by the Service provider. To substantiate his above stand, the ld. D.R. has relied on the judgment of Honble Supreme Court in the case of Commissioner of Central Excise, New Delhi vs. Hari Chand Shri Gopal reported in 2010 260 ELT 3 (S.C.) and Eagle Flask Industries Ltd vs. CCE, Pune reported in 2004 (171) ELT 296 (S.C.). He further submits that since the appellant is not registered as the input service distributor, the provisions of Rule 2 (m) and Rule 7 of the Cenvat Credit Rules will have no application and the credit cannot be distributed to Unit I for taking cenvat benefit.

6. I have heard the ld. Counsels for both the sides and perused the records.

7. It is noticed that both the Unit I & Unit II are of the appellant M/s.Raymond Ltd. The Unit II is undertaking the job work activities exclusively for unit No.1 and after receipt of the job worked goods from the Unit II, the same after further processing removed from the Unit No.1 on payment of appropriate Central Excise Duty. It is not the case of the Department that the cenvat credit attributable to the input services has been taken in the books of Unit II as well as in Unit I. Therefore, in absence of any specific finding that there is no mis-utilization of cenvat credit, the benefit of cenvat has been extended to the manufacturer, Unit I and the same has been utilized for payment of central excise duty on clearance of the excisable goods from the factory. Since both the Unit I and unit II belonging to the appellant are interlinked, the services utilized by one unit can be taken by the other unit. The cenvat statute in Rule 7 has provided that the input service distributor may distribute the credit among its other manufacturing units. The restrictions contained in the said rule have no application to the facts of this case. The statute specifically provides for taking of cenvat credit upon fulfillment of the conditions that the input service has been received and utilized for the intended purpose and in absence of any specific findings that the credit has not been mis-utilized by the appellant, credit should be allowed to Unit I, even if, the input services have been provided to the Unit II. In this contest, I find support from this Tribunals decision cited by ld. Chartered Accountant in the case of Greaves Cotton Ltd. (supra). The relevant paragraph of the said decision is extracted herein below:-

7. In the present case, M/s.Greaves Cotton Ltd. is engaged in the manufacture of IC Engine and Diesel Engine through their Unit-I and Unit-II respectively. There is no dispute that Unit-I availed the credit on the service tax paid on advertisement charges which has been accounted as an expense to the appellant-company. It is a fact that the appellant-company is eligible to avail the benefit of the input service credit on the advertisement charges. The dispute relates to Unit-II should avail the credit instead of Unit-I. The adjudicating authority accepted this fact. In terms of Rule 2(m) of Cenvat Credit Rules, 2004, the appellant-company viz. Unit I could have distributed the credit of service tax paid on the advertisement charges to Unit-II. Rule 7 of the Rules 2004 provides the manner of distribution of credit by input service distributor. In the case of Ecof Industries Pvt. Ltd. (supra), the issue involves whether the appellant is correct in distributing the credit of service tax in respect of their Malur Unit even though the service tax has been paid in respect of their Cuttack unit. The Tribunal while dealing with Rule 7 of Cenvat Credit Rules, 2004 and para 2.3 of the Master Circular of Service tax dt. 23.8.2007 held as under:-

"8. The combined reading of the Rule 7 and the clarificatory Circular dated 23-8-2007 clearly shows that there are only two restrictions regarding the distribution of the credit. The first restriction is that the credit should not exceed the amount of Service Tax paid. The second restriction is that the credit should not be attributable to services used in manufacture of exempted goods or providing of exempted services. There are no other restrictions under the rules. The restrictions sought to be applied by the Department in this case in limiting the distribution of the Service Tax credit made in respect of the Malur unit on the ground that the services were used in respect of the Cuttack Unit finds no mention in the relevant rules. As such, restricting the distribution of Service Tax credit in a manner as has been done by the impugned order of the lower appellate authority (original authority had approved of such distribution) cannot be upheld. In case the Department wants to place such restriction as is sought to be placed in the case, the rule is required to be amended."

8. The submissions of the ld. D.R. that the requirement of Notification No.214/86CE dated 25th March 1986 has not been complied with and, thus, input service credit shall not be available to the appellant.

9. Sub-rule (1) of Rule 3 entitles a manufacturer to take cenvat credit of service tax paid on any input service received by the manufacturer of the final product. In the present case since the ultimate finished product manufactured in the factory of Unit I who removed the goods on payment of Central Excise Duty. The job worker unit II only manufactures the intermediate goods and both the units are belonging to one company, cenvat credit cannot be denied.

10. Further, it is contended that the appellant maintained the common books of accounts with regard to the Unit I and Unit II and the services utilized in Unit II and credit taken in Unit I have been duly reflected in the said common books of accounts. Rule 7 of the Cenvat Credit Rules also entitles a manufacturer to take cenvat credit of service tax, even if, the amount has been paid by some other unit or the office of the manufacturer located elsewhere. Tribunal in the case of Greaves Cotton Limited (supra) has allowed the cenvat credit in an identical set of facts. Since the said decision of the Tribunal has been upheld by the Honble Karnataka High Court reported in 2011 (271) ELT 58 (Kar.) and the said judgment has not been appealed against by the Department, the issue involved in the present case is squarely covered by the decision cited (supra). In view of the fact that the provisions of the requirements of Notification No. 214/86 is not applicable in the facts and in the circumstances of the present case, The judgment cited by ld. D.R. are squarely distinguishable.

11. In view of the foregoing, the appellant is eligible to take cenvat credit on the disputed services and, thus, the impugned order is set aside. The appeal is allowed in favour of the appellant.

(Dictated and pronounced in the open Court)

(S.K. MOHANTY)

MEMBER (JUDICIAL)

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