LAWS(CE)-2014-6-86

DABUR INDIA LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

Decided On June 16, 2014
DABUR INDIA LTD. Appellant
V/S
COMMISSIONER OF CENTRAL EXCISE Respondents

JUDGEMENT

(1.) THE facts leading to filing of these appeals and stay applications are, in brief, as under.

(2.) SHRI B.L. Narasimhan, Advocate, the learned Counsel for the appellant, pleaded that the Cenvat credit demand of Rs. 28,49,22,977/ - confirmed against the appellant company, corporate office as "Input Service Distributor" is without any basis and contrary to the provisions of the law, as the Input Service Distributor, which is the corporate office of the appellant company, is neither a manufacturer nor a provider of output service, while in terms of Rule 14 of the Cenvat Credit Rules, 2004 the wrongly taken or wrongly utilized Cenvat credit can be recovered from the manufacturer or provider of output service, that in any case, demanding Cenvat credit of Rs. 28,49,22,977/ - from the corporate office of the appellant company as "Input Service Distributor" and also demanding the same Cenvat credit from its various manufacturing units at Sahibabad, Alwar and Pithampura, which has been distributed by the corporate office out of the total amount of Rs. 28,49,22,977/ - amounts to duplication and demanding same amount of Cenvat credit more than once, that in view of this, when the Service Tax Cenvat credit alleged to have wrongly passed on to Sahibabad, Alwar and Pithampura is sought to be recovered by them, there is absolutely no justification for demanding the same amount from the corporate office while as ISD had distributed the credit, that in view of this, the Cenvat credit demand of Rs. 28,49,22,977/ - against the corporate office (ISD) is without any basis and for the same reason there is no justification for imposition of penalty equal to the 25% of this amount on it under Rule 15(2) of the Cenvat Credit Rules, 2004, that as regards the Cenvat credit demands of Rs. 2,32,28,113/ -, Rs. 5,32,18,665/ - and Rs. 9,68,91,270/ - from Sahibabad unit, Alwar unit and Pithampura unit of the appellant company along with interest thereon under Section 11AB, this Cenvat credit had been taken by the corporate office and distributed in respect of advertisement and sales promotion services, that the above quantum of Cenvat credit is sought to be denied to the appellant company's units at Sahibabad, Alwar and Pithampura by invoking Rules 6(1) of the Cenvat Credit Rules, 2004 according to which Cenvat credit shall not be allowed on such quantity of inputs used in or in relation to manufacture of exempted goods or for provision of exempted services or input services used in or in relation to manufacture of exempted goods, that while the sales promotion and advertisement and publicity services are covered by the inclusive portion of the definition of 'input service,' as given in Rule 2(1) of Cenvat Credit Rules, 2004, this service cannot be treated as having been used in or in relation to manufacture of final products and hence the provisions of Rule 6(1) are not applicable, that the period of dispute in this case is from April 2006 to March 2011 and during this period as per the provisions of Rule 7 of the Cenvat Credit Rules, 2004, the distribution of Service Tax Cenvat credit by an Input Service Distributor among its manufacturing units/providers of output service was subject to only three conditions mentioned in clause (a), (b) & (c) of this rule, that all these conditions are satisfied inasmuch as the credit distributed by the corporate office does not exceed the credit taken in its accounts on the basis of the invoices for the input services, in question, that the credit of Service Tax attributable to the service used wholly in a unit has not been distributed to other unit and the credit of Service Tax attributable to service used in a unit exclusively engaged in the manufacture of exempted goods has not been distributed, that during the period of dispute there was no provision that credit of Service Tax attributable to a service used in more than one unit shall be distributed pro rata on the basis of the turnover during the relevant period of the concerned unit to the sum total of the turnover of all the units to which the service relates, that such a provision was introduced by adding clause (d) to Rule 7 w.e.f. 1 -7 -2012 and this clause cannot be given retrospective effect, that the restriction contained in clause (b) of Rule 7 of the Cenvat Credit Rules, 2004 is applicable to the distribution of credit in respect of the services which are "used in a unit" and would not be applicable to the advertisement and sales promotion service which are not used in a unit, but are used outside the manufacturing unit as post manufacturing activities, that Hon'ble Karnataka High Court in the case of CCE, Bangalore -I v. ECOF Industries Pvt. Ltd. reported in : 2011 (23) S.T.R. 337 (Kar.) : 2011 (271) E.L.T. 58 (Kar.), the Tribunal in the case of Doshion Ltd. v. CCE reported in : 2013 (288) E.L.T. 291 (Tri. -Ahmd.) and in the case of Demosha Chemicals Pvt. Ltd. v. CCE. reported in : 2014 -TIOL -534 -CESTAT -AHM : 2014 (134) S.T.R. 758 (T) in respect of the provisions of Rule 7 of the Cenvat Credit Rules, 2004, as the same stood during the period prior to 1 -7 -2012, has held the distribution of credit by Input Service Distributor among its various manufacturing units need not be in proportion to the turnover of the units and it should be subject only to the conditions specified in the Rule in this regard i.e. condition (a), (b) and (c), that in view of this, there is no irregularity in the availment of Cenvat credit in respect of advertisement and sales promotion services by the corporate office as Input Service Distributor and distribution of this credit among its various manufacturing units including the Sahibabad, Alwar and Pithampura unit, that the appellant have strong prima facie case in their favour, that in any case the extended period of 5 years under proviso to Section 11A(1) of the Central Excise Act, 1944 is not available to the Department for recovery of allegedly wrongly availed Cenvat credit inasmuch as in the circumstances of the case, there was no wilful misstatement or suppression of fact on the part of the appellant units, that in the impugned order, the longer limitation period has been invoked alleging that the corporate office at Kaushambi (ISD) has colluded with its manufacturing units at Sahibabad, Alwar and Pithampura, that this allegation is absurd as there cannot be any collusion between head office and its manufacturing unit, that in view of these circumstances, in any case, the Cenvat credit demand only for normal limitation period of one year from the relevant date can be confirmed, that while Sahibabad unit has paid Rs. 1,00,00,000/ -, Alwar unit and Pithampura unit have paid the amount of Rs. 55,70,602/ - and Rs. 2,42,67,970/ - respectively which represents the duty demands within normal limitation period, that in the circumstances of this case, no penalty under Rule 15(2) read with Section 11AC of Central Excise Act, 1944 would be imposable and that in view of this, so far as the Sahibabad unit, Alwar unit and Pithampura unit are concerned, the amount already paid by them is sufficient for hearing of their appeals and so far as the corporate office at Kaushambi (Input Service Distributor) is concerned, the requirement of pre -deposit of Cenvat credit demand, interest thereon and penalty may be waived, as the very basis of this demand is contrary to the provisions of the law and its pre -deposit would cause undue hardship to them.

(3.) WE have considered the submissions from both the sides and perused the records.