Piramal Glass Pvt Ltd Vs C.C.E. & S.T. (CESTAT Ahmedabad)
The case concerns the eligibility of Cenvat credit on common input services availed by a company operating two manufacturing units, one at Koshamba and the other at Jambusar. The appellant had availed Cenvat credit amounting to ₹81,19,072 during February to March 2013 at its Koshamba unit for common input services used across both units. The department contended that since the services were common to both units, the Koshamba unit was not entitled to claim the entire credit and could only avail proportionate credit attributable to its own operations. Consequently, the department denied the proportionate credit attributable to the Jambusar unit, leading to the present appeal.
The appellant argued that the denial of credit was based on Rule 7(d) of the Cenvat Credit Rules, 2004, but submitted that judicial precedents had consistently interpreted the rule to allow flexibility. It was contended that, prior to the 2016 amendment, the rule used the term “may distribute,” indicating that distribution of credit among units was optional rather than mandatory. Therefore, the appellant maintained that it was permissible to avail the entire credit in one unit without distributing it proportionately.
The appellant relied on several judicial decisions, including those of the Bombay High Court and various Tribunal rulings, which interpreted Rule 7(d). These judgments emphasized that both before and after the 2012 amendment, the wording of the rule provided discretion to the assessee regarding distribution of input service credit. The use of the word “may” indicated that distribution was not compulsory. It was also highlighted that the rule was amended with effect from 1 April 2016, replacing the word “may” with “shall,” thereby making distribution mandatory only from that date onward.
