Sudhir Gansets Ltd Vs Commissioner of C.E & S.T. (CESTAT Ahmedabad)
The case concerns the eligibility of CENVAT credit distributed by a head office acting as an Input Service Distributor (ISD) to one manufacturing unit of the appellant company. The appellant is engaged in manufacturing diesel generator sets and operates multiple manufacturing units located in Silvassa, Haryana, and Jammu & Kashmir, with its head office in Gurgaon registered as an ISD.
During the relevant period from April 2008 to March 2012, the head office received invoices for input services such as rent and sponsorship services, paid the service tax, and distributed the entire credit exclusively to the Silvassa unit through ISD invoices. No credit was distributed to the other units. A CERA audit objected to this distribution, contending that credit should have been apportioned equally among all units. Consequently, five show cause notices were issued proposing recovery of two-thirds of the credit amounting to ₹49,58,186, along with penalties. The adjudicating authority confirmed the demand and penalty, and subsequent appeals were rejected, leading to the present appeal before the Tribunal.
The appellant argued that prior to the amendment of Rule 7 of the CENVAT Credit Rules, 2004 with effect from 01.04.2012, there was no requirement for proportionate distribution of credit among units. It was submitted that Rule 7, as it stood during the relevant period, allowed the ISD to distribute credit without mandating proportional allocation. The appellant relied on various judicial precedents to support the contention that such distribution was legally permissible. It was also argued that any issue regarding distribution should be examined at the ISD level and not at the recipient unit. Further, the appellant contended that the demand for extended periods was time-barred as there was no suppression of facts and all details were duly recorded in statutory returns.
