The Commissioner Of Central Excise vs. M/S ITC Limited
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Cause title — parties, addresses and appearances
JUDGMENT This appeal under Section 54G of the Central Excise Act, 1944 (hereinafter referred to as the Act for short) has been preferred by the revenue against the order dated 12.07.2016 passed by the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as 'the tribunal' for short). The appeal was admitted by a this Court on the following substantial questions of law:
3 (i) Whether the credit distributed by ILTD which was void ab initio could be availed as credit by M/s. ITC, Bangalore. (ii) Whether CESTAT was right in not taking into cognizance the facts brought out in the Order-In-Original that M/s ILTD is not an office or establishment of the said manufacturer i.e., M/s ITC Ltd Bangalore and hence credit distributed by M/s ILTD as well as availed by M/s ITC were irregular? (iii) Whether the provisions of Rule 2(m) of Cenvat Credit Rules, 2004 have been satisfied for distribution of credit by ILTD and subsequently whether such credit could be availed by M/s ITC?
Facts leading to filing of this appeal briefly stated are that the Indian Leaf Tobacco Division (ILTD) is a division of ITC Group of Companies and is involved in the activity of processing and supply of leaf tobacco. The assessee viz., the respondent is registered as Input Service Distributor under the Cenvat Credit Rules, 2004
4 read with Service Tax Rules, 1994 for its Indian Leaf Tobacco Division, which is situate in Guntur. The Cenvat Credit to the extent of Rs.3,25,80,308/- was availed by the assessee on the basis of documents issued by ILTD in the capacity as in Input Service Distributor for a period from January 2008 to March 2009. During the course of audit for the aforesaid period, it was observed by the department that the assessee had availed input credit passed on by the head office of the office viz., ILTD located in Guntur in the State of Andhra Pradesh, which was not registered under the Central Excise Act as goods processed and supplied by them are not subject to levy of central excise duty. The aforesaid unit was also not found to be providing any output service.
Thereupon a show cause notice dated 03.02.2011 was issued to the assessee by which it was supposed to deny them the benefit of availment of the cenvat credit and the assessee was asked to show cause as to why a sum of Rs.3,25,80,308/- should not be 5 recovered under the provisions of Rule 14 of Cenvat Credit Rules, 2004 read with Section 11 A of the Central Excise Act and why interest and penalty be not recovered. The assessee filed a reply. The Commissioner of Central Excise, Bangalore - II vide order dated 31.10.2011 has confirmed the demand of Rs.3,25,80,308/-.
The assessee thereupon filed an appeal before the Customs Excise and Service Tax Appellate Tribunal. The tribunal by an order dated 12.07.2016 allowed the appeal preferred by the assessee. In the aforesaid factual background, this appeal has been filed.
Learned counsel for the appellant submitted that the tribunal ought to have appreciated that M/s ILTD is not eligible to be an Input Service Distributor as it is not an office or an establishment. In this connection, our attention has been invited to Rule 2(m) of Cenvat Credit Rules, 2004. It is also argued that ILTD
6 is neither a manufacturer of excisable goods nor is a provider of output services. Therefore, the question of availing any input service by ILTD does not arise.
On the other hand, learned counsel for the assessee has submitted that ILTD, which belongs to the assessee i.e., ITC Group is an integral division of the assessee and the aforesaid division is located in Guntur in the state of Andhra Pradesh, whereas, the Head Office of the Company is situated in Calcutta and the Company has the factories all across the country including Bangalore. It is also submitted that the appellant has accepted the stand of the assessee with regard to extension of benefit of availing of input service credit in respect of previous periods viz., November 2010 to July 2011 and August 2011 to December 2011. It is also urged that the revenue now cannot be permitted to take a different stand. It is also urged that the tribunal has rightly placed reliance on the division bench decision of this court which has attained finality. In support of 7 aforesaid submission, reliance has been placed on 'UNION OF INDIA AND OTHERS VS. KAUMUDINI NARAYAN DALAL AND ANR.', 249 ITR 219 SC.
We have considered the submissions made by learned counsel for the parties and have perused the record. The ILTD belongs to the assessee viz., ITC and is an integral division of the assessee. The aforesaid Division is not a separate legal entity and controls the supply chain of un-manufactured tobacco to the factories. The Company is registered as Input Service Distributor under the Cenvat Credit Rules, 2004 read with Service Tax Rules, 1994 for its Indian Leaf Tobacco Division in Guntur. The aforesaid registration enables distribution of service tax paid input credits to manufacturing activities carried on in the factories. A division bench of this court in COMMISSIONER OF C.EX., BANGALORE-I VS. ECOF INDUSTRIES PVT. LTD.,', 2011 (271) E.L.T.58 (KAR.) has held that there are only two limitations imposed under Rule 7 of 8 the Rules, for distribution of credit by a Input Service Distributor. Firstly, it cannot exceed the amount of service tax paid and secondly, the credit of service tax attributable to service used shall not be distributed in a unit exclusively engaged in the manufacture of exempted goods or providing of exempted services. The manufacturer is therefore, required to register himself as Input Service Distributor and thereafter, is entitled to distribution of credit of such input in the manner prescribed under the law. The tribunal has placed reliance on the aforesaid decision of this court, which has attained finality. No submission has been made before us as to how the aforesaid decision is not applicable to the case of the assessee.
For yet another reason, the appellant cannot be permitted to challenge the correctness of the view taken by the tribunal. It is pertinent to mention here that Additional Commissioner of Central Excise had confirmed the demand with regard to availment of Input
9 service Tax credit by the assessee for the period of November 2010 to July 2011 by an order dated 30.11.2012 in case of assessee. The assessee thereupon filed an appeal before the Commissioner of Central Excise (appeals), which was allowed by an order dated 31.01.2014. Against the aforesaid order, the revenue filed an appeal before the tribunal, which was dismissed by an order dated 02.11.2016 and the stand of the assessee with regard to availment of input tax credit was accepted. However, the aforesaid order was not challenged further and the revenue accepted the order of the tribunal for period viz., November 2010 to July 2011. Similarly, for the assessment period viz., August 2011 to December 2011, the order of the tribunal dated 11.09.2017 was accepted and no further challenge was made. Since, the revenue has accepted the entitlement of the assessee to avail off the input credit for the assessment periods viz., November 2010 to July 2011 and for a period from August 2011 to December 2011,
10 the revenue cannot be permitted to challenge its correctness. Reference in this regard may be made to decisions of Supreme Court in 'CCE VS. BIGEN INDUSTRIES LIMITED', 2006 (197) ELT 305 (SC), 'BOVING FOIURESS LTD. VS. CCE', 2006 (202) ELT 389 (SC), 'MARSONS FAN INDUSTRIES VS. CCE', 2008 (225) ELT 334 (SC), 'INDIAN OIL CORPORATION VS. CCE', 2006 (202) ELT 37 (SC). The order passed by the tribunal does not suffer from any infirmity. For the aforementioned reasons, the substantial questions of law are answered against the revenue and in favor of the assessee. In the result, the appeal is dismissed. JUDGE JUDGE ss
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