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CX - CENVAT -Since Respondent's factory occupied 95% of factory area, they are entitled for 95% of total CENVAT credit on common input services: CESTAT

By TIOL News Service

MUMBAI, FEB 19, 2018: THIS is a Revenue appeal.

The respondents are engaged in the manufacture of excisable goods namely Fragrances, Flavours, Aroma Chemicals during the period April 2011 to March 2012.

During audit it was observed that the respondents had availed credit to the tune of Rs.48,07,923/- on the service tax paid on input services i.e. security services, computer training, consultancy, legal services and secretarial services shared by other entities.

It appeared that the said services were not used exclusively in or in relation to the manufacturing of the final product of the respondent but were shared with others.

The respondent had neither taken registration as an Input Service Distributor nor issued any invoices for input service for which they had availed CENVATCredit.

SCN was issued on 18.02.2015 demanding reversal of credit and the demand was confirmed with penalty.

In appeal, the Commissioner (Appeals) directed the adjudicating authority to verify the documents and it was also observed that since the respondent occupied 95%of the factory area and 5% area is occupied by M/s. KevaFlavours Pvt. Ltd. the respondents are entitled to 95% of the total credit.

Inasmuch as the matter was remanded to the original authority.

Revenue is aggrieved with this order and in their appeal before the CESTAT submitted that the logic applied of 95% of cenvat credit is not supported by any Rule of CCR. Further, since the respondent had not followed the provisions of Rule 7 of CCR, 2004 and had resorted to suppression of fact, therefore, penalty u/s 11AC was rightly imposable.

The Bench observed -

++ the Commissioner (Appeals), on the fact that certain common services were used for both the entities i.e. for the premises of the respondent as well as of M/s. KevaFlavours decided that the respondent is entitled for credit to the ratio of 95%.

++ in this finding I do not find anything wrong for the reason that the respondent shall get the cenvat credit on the services which was received and used for the purpose of their premises to that extent it cannot be denied.

++ as per the Commissioner (Appeals) order, the respondent is entitled for the major portion of the credit, therefore, the malafide intention cannot be attributed to the respondent. Accordingly, the Commissioner (Appeals) finding for dropping the penalty under Section 11AC of the Act is proper and legal.

Concluding that there is no merit in the appeal, the impugned order was upheld and the Revenue appeal was dismissed.

(See 2018-TIOL-590-CESTAT-MUM)


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