In a batch of appeals, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) of Delhi has held that Input service credit distributed by Parle Biscuits as an Input Service Distributor working on CMU is allowable under rule 7(d) of the CENVAT Rules.
The appeal was filed to determine whether the issuance of an Input Service Distributor (ISD) invoice by M/s Parle Biscuits Pvt. Limited to its contract manufacturing unit (M/s M.B. Industries Pvt. Ltd.,) is legal and correct when the contract manufacturing is carried out in terms of Notification No. 36/2001-CE (NT).
The Appellants are engaged in the manufacture of Biscuits falling under Heading 1905 of the erstwhile Central Excise Tariff exclusively for PBPL, under their brand name as a CMU, in terms of Clause (ii) of Notification No.36/2001-CE(NT) dated 26.6.2001.
Counsel Sh. Sachin Chitnis appearing for the appellants assailing the impugned order(s) the Appellants submit that Rule 9(1) of the 2001 Rules provides for registration of every person, who produces, manufactures, carries on a trade, holds private store-room or warehouse or otherwise uses excisable goods. Further stated that Rule 2(m) read with Rule 7 of CCR, 2004, provides a facility to an office of the manufacturer of the final product to distribute cenvat credit in respect of service tax paid on the input service to its manufacturing unit, wherein manufacturing unit need not be owned by the input service distributor and the expression “its manufacturing unit” would also include a manufacturer manufacturing on behalf of the principal manufacturer.
Commissioner (Appeals) has held that Rule 7 leaves no ambiguity that ISD can distribute credit to its manufacturing units and that “outsourced manufacturing units‟ as defined in Explanation 4 have been newly inserted in Rule 7 of CCR w.e.f. 1.4.2016 and not clarificatory in nature and cannot be applied retrospectively.
As per the Notification No.36/2001CE-(NT) dated 26.6.2001, under which the Biscuits were manufactured and cleared by the Appellants, for and on behalf of PBPL, mandated that when goods are manufactured on account of any other person, such person has to authorise the manufacturer, who manufactures the goods, to comply with all procedural formalities under Central Excise Act & the Rules made thereunder, also to furnish all the information to enable determination of the value of said goods, under Section 4A, and to discharge all liabilities under the Act and Rules made thereunder.
A Coram of Mr Anil Choudhary, member (judicial) hon’ble Mr P V Subba Rao, member (technical) observed even in terms of the provisions of Rule 2(m) and Rule 7 of the CENVAT Rules, before 01.04.2016, the Appellants could distribute CENVAT credit in respect of the service tax paid on inputs services to its manufacturing units, including job workers.
While allowing the appeal, the Tribunal held that the appellant company can distribute CENVAT credit in respect of the service tax paid on inputs services to its manufacturing units, including a job worker and set aside the impugned orders.
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