PRAJ INDUSTRIES LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE appellant is in appeal against the impugned order wherein duty demand of Rs. 3,79,00,035 has been confirmed against the appellant along with interest and equivalent amount of penalty under section 11AC of the Central Excise Act as also been imposed. The brief facts of the case are that the appellant is engaged in the manufacture of equipment, machinery, etc., required for distilleries, breweries, and ethanol projects at their manufacturing units situated at Khed and Sanaswadi. Khed unit is 100 per cent EOU unit. Sanaswadi is a DTA unit. The head office is situated at Pune and the same is registered with the Department as input service provider during the period June, 2006 to April, 2008. The appellant received the services of commission agent located overseas for procuring the orders for goods manufactured by the appellant for their EOU unit. Based on the procurement of the purchase orders, the appellant exports the final product manufactured by them. The appellant also received various other common input services used in or in relation to the manufacture of final dutiable goods. The payments of the input services were made by the appellant's head office. The appellant's head office also paid the service tax on commission paid to overseas commission agent for procuring the purchase orders for export of goods under reverse charge mechanism. The head office distributed the service tax credit of Rs. 3,79,00,035 to the appellant's DTA unit. The appellant availed of and utilised the aforesaid credit for payment of Central excise duty on the final product manufactured and cleared by them. The EOU unit was also clearing final goods in DTA on payment of applicable excise duty. In these set of facts, the show -cause notice was issued to the appellant (DTA unit) that the service tax credit distributed by the appellant's head office is not admissible as the service tax credit was availed of in respect of input service received by the appellant EOU unit. Therefore, the credit is not admissible to the DTA unit.

(2.) TO avoid litigation, the appellant reversed the entire amount of service tax credit along with interest from the DTA unit and availed of the said credit for their EOU unit. Thereafter, a show -cause notice was issued on April 8, 2010 proposing to reverse the entire service tax credit transferred by the head office to the appellant (DTA unit) during the period June, 2006 to April, 2008 along with interest and proposal to imposition of penalty was also made. The sole allegation in the show -cause notice is that the input service were received by the EOU unit, therefore, the same cannot be input service for DTA unit and credit of same is not admissible to DTA unit. The show -cause notice was adjudicated and converted into an impugned order. Aggrieved from the said order, the appellant is before us.

(3.) HE further submits that the dispute is in nature revenue neutral as there is not loss to the Revenue because the Cenvat credit was available to EOU unit and the said unit was converted into DTA unit and the credit was transferred to DTA unit as per rule 10 of the Cenvat Credit Rules, 2004. Therefore, the situation is the revenue neutral and in that situation, demand is not sustainable. To support this contention, he relied on Narayan Polyplast, [2005] 4 RC 605 :, [2005] 179 ELT 20 (SC), Narmada Chematur Pharmaceuticals Ltd., [2005] 179 ELT 276(SC) , Textile Corpn., [2008] 231 ELT 195(SC) , Jamshedpur Beverages, [2007] 214 ELT 321(SC) and Coca -Cola India P. Ltd., [2007] 213 ELT 490(SC) .