COMMISSIONER OF C. EX. Vs. ELDER PHARMACEUTICALS LTD.

JUDGEMENT

(1.) THE appellant Elder Pharmaceuticals Ltd. (Elder in short) and the Revenue have challenged the impugned order before us wherein two show cause notices (a) dated 4 -10 -2011 for the period September, 2006 to March, 2010 and (b) dated 21 -5 -2012 for the period January, 2011 to March, 2012 were adjudicated. Revenue has also filed two appeals, one against the order of the Commissioner (Appeals) wherein the appeal filed by the assessee was allowed and one against the order of the adjudicating authority. Brief facts of the case are that the assessee is engaged in the activity of manufacturing of Pharmaceutical products and their manufacturing units located at Patalganga in Maharashtra, Selaqui and Langa Road in Uttaranchal and Paonta Sahib in Himachal Pradesh and distributes the same to Nerul, Pawane and Patalganga factories at Maharashtra. The appellant is having their Head Office at Andheri (W), Mumbai. The manufacturing units located at Uttaranchal and Himachal Pradesh are not paying Central Excise Duty. The appellant is also engaged in the activity of trading of goods at their Head Office. The other units are manufacturing dutiable as well as exempted goods. The Head Office at Andheri (West) distributed the Cenvat credit of input services to the units located at Nerul, Pawane and Patalganga. While distributing Cenvat credit the Head Office has distributed credit in proportion of turnover i.e. credit attributable to units exclusively engaged in exempt goods and credit attributable to trading was not distributed. However, Cenvat Credit on input services covered under Rule 6(5) of Cenvat Credit Rules, 2004 was distributed in full so long as it did not pertain to units exclusively engaged in manufacture of exempt goods or trading. Therefore, it was alleged in the show cause notice that in respect of services mentioned in Rule 6(5) of Cenvat Credit Rules, 2004, the ISD could not take 100% credit and distribute it. The adjudicating authority adjudicated the matter and disallowed the credit under Rule 6(5) of Cenvat Credit Rules, 2004 and redistributed the whole of Cenvat credit distributed by ISD. Aggrieved by the said order, the assessee is before us.

(2.) CONSIDERED the submissions made by both the sides and perused the records.

(3.) THE learned Counsel appearing for the assessee submits that Rule 6(5) of Cenvat Credit Rules, 2004, grants immunity to specified services; that even if part of such services are used in exempt business, full credit can be availed and utilized. Availing this immunity of Rule 6(5) of the Cenvat Credit Rules, 2004, the assessee has complied with the Rule 6(5) services. He submits that in the impugned order the learned Commissioner (Appeals) held that such immunity would be available only to manufacturers and not to ISD (input service distributor) as even ISD is indeed an office of the same manufacturer. Therefore, it cannot be said that ISD is not a manufacturer. Therefore, the ISD cannot be put to disadvantageous position than the manufacturer without ISD. The ISD mechanism is only to facilitate smooth transition of credit accruing at one location to another location where it can be used. It is not in dispute that the assessee has fulfilled the conditions of Rule 7 of the Cenvat Credit Rules, 2004 and therefore, the assessee is entitled to avail Cenvat credit distributed by ISD as per Rule 6(5) of the Cenvat Credit Rules, 2004. It is further submitted that the assessee was right in distributing the credit at their discretion based on the provisions of Rule 7 of the Cenvat Credit Rules, 2004 as it existed at the relevant time.