The Mumbai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that Cenvat utilization by any unit of the same entity would not make any loss to the exchequer.
M/s. Morganite Crucible (India) Ltd, the appellant is engaged in the manufacturing of excisable goods viz. Silicon Carbide Crucibles, Clay Graphite Crucibles and spout cement etc. at their factory. They started manufacturing a new product Die Lube at their other unit at different premises with separate Central Excise registration for this product.
During the period they had availed Cenvat credit of common services such as Management, Software, Accounting, Auditing, Banking, Trade mark, Security, and SAP software system used for the manufacture and clearance of their final product of Die Lube at that separate premises, which according to the department the appellant has wrongly availed to the extent of turnover of their Die Lube Unit in violation of Rule 7 of Cenvat Credit Rules, 2004.
As per the department common input services shall be distributed to all units pro rata based on turnover of such units during the relevant period as prescribed in Rule 7 of Cenvat Credit Rules and accordingly after invoking the extended period a demand cum show cause notice dated 27.2.2017 was issued to the appellant, which culminated into Adjudication order dated 14.12.2017 disallowing the credit is taken and recovery of the amount of Rs.3,46,039/- along with interest and penalty. On Appeal, the Commissioner (Appeals) upheld the order of the lower authority.
It was submitted that the appellant is the head office of the company, which is not an Input Service Distributor (ISD) registrant and is availing and utilizing the Cenvat credit of services availed at other units and not distributing the same.
A single member bench of Mr Ajay Sharma, Member (Judicial) viewed that “the entire excise would be revenue neutral as the utilization by any unit of the same entity would not make any loss to the exchequer as the credit disallowed from one unit in proportion to the second unit will be eligible as a credit to such other unit and the net credit availment and utilization form a company’s perspective will remain unchanged and also that the appellant is not going to gain anything extra to its entitlement.”
The CESTAT set aside the impugned order and allowed the appeal filed by the appellant.
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