Indo MIM Pvt. Ltd Vs Commissioner of Central Excise (CESTAT Bangalore)
The appeals before CESTAT Bangalore arose from an order disallowing CENVAT credit availed by the appellant on common input services across multiple manufacturing units and confirming demand along with interest and penalties for the period July 2012 to August 2015. A separate appeal by the department challenged the reduction of penalty imposed by the adjudicating authority.
The appellant operated three manufacturing units and one job worker unit, with branch offices abroad engaged in sales promotion activities. The appellant incurred expenses in foreign currency for export promotion and professional services, on which service tax was paid under the reverse charge mechanism. These expenses were treated as common input services attributable to all manufacturing units.
The department alleged that the appellant had availed CENVAT credit on common input services without obtaining Input Service Distributor (ISD) registration, thereby violating Rule 2(m) of the CENVAT Credit Rules, 2004. It was contended that such credit should have been distributed across units in accordance with Rule 7.
The appellant argued that during the relevant period, Rule 7 used the expression “may distribute,” indicating that distribution of credit was optional and not mandatory. It was further submitted that the requirement to mandatorily distribute credit was introduced only with effect from 01.04.2016. Therefore, availing credit at a single unit without ISD registration did not render the credit inadmissible.
