The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) remanded the matter concerning the Excise Department’s disallowance of CENVAT credit distribution to a unit exclusively manufacturing exempted goods citing the need for verification of records to ensure the accuracy of the credit allocation.
Voltas Ltd., the appellant engaged in manufacturing excisable goods under Chapter 84 of the Central Excise Tariff Act, 1985, across three factory units in Thane, Silvassa, and Pant Nagar, Uttarakhand.
The appellant’s head office in Mumbai distributed input service tax credits to the manufacturing units using Input Service Distributor (ISD) invoices. The Excise Department objected to the credit distribution because the Pant Nagar unit exclusively manufactured exempted goods and thus was not entitled to receive Cenvat credit.
A show cause notice was issued leading to an adjudication order which confirmed a demand for Cenvat credit recovery against the appellant.
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The appellant appealed to the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) which remanded the case to the original adjudicating authority for verification of invoices related to the distribution of input services.
During the remand proceedings, the original authority allowed Cenvat credit for Chartered Accountant Services and General Insurance Services but disallowed credit worth Rs. 2,06,35,197/- for other services in an order dated 30.11.2015.
The appellant again approached CESTAT, arguing that the Pant Nagar unit was set up only in May 2006 so any confirmed credit demand for periods before this is invalid. The appellant’s counsel argued that only 2% of the total adjudged Cenvat credit pertains to the Pant Nagar unit and submitted a practicing Chartered Accountant’s certificate to support this claim.
The two-member bench comprising S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) agreed with the appellant and held that credit distributed to Pant Nagar alone could be confirmed and that the original authority needed to verify records and the Chartered Accountant’s certificate for this purpose.
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So, the tribunal set aside the impugned order and remanded the matter to the original authority for a fresh decision specifically directing the verification of records for the period May 2006 to February 2007, and directed the original authority to grant a personal hearing during the fresh adjudication. The appellant’s appeal was allowed.
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