Morganite Crucible (India) Ltd. Vs Commissioner of Central Excise & Service Tax (CESTAT Mumbai)
In a recent case, M/s. Morganite Crucible (India) Ltd. v. Commissioner of Central Excise & Service Tax [Excise Appeal No. 86235 of 2019 dated June 13, 2023], the CESTAT in Mumbai made a significant ruling. The order that restricted the assessee from availing credit related to one of its units was set aside. The CESTAT held that the utilization of credit by any unit within the same entity would not cause any loss to the Exchequer. This is because the credit disallowed to one unit is proportionally made available to the second unit. From a company’s perspective, the net credit availed and utilized remains unchanged. It is important to note that the assessee does not gain any additional benefit beyond its entitlement.
Facts:
M/s. Morganite Crucible (India) Ltd (“the Appellant”) is engaged in the manufacturing of excisable goods, such as Silicon Carbide Crucibles, Clay Graphite Crucibles, spout cement, and more, at their factory. The Appellant expanded its operations by manufacturing a new product called Die Lube at a separate unit located in different premises, which had its own Central Excise registration. From the financial year 2012-13 until August 2014, the Appellant availed CENVAT credit for common services such as management, software, accounting, auditing, banking, trademark, security, and the SAP software system used for the manufacturing and clearance of their final product, Die Lube, at the separate premises.
The Department issued a Show Cause Notice dated February 27, 2017 (“the SCN”) demanding INR 3,46,039/- on the grounds that the common input services should have been distributed among all units in proportion to their respective turnovers during the relevant period. The Appellant’s Head Office was alleged to have wrongly availed the credit, thereby violating Rule 7 of the CENVAT Credit Rule, 2004 (“the Cenvat Credit Rule”).
The Adjudicating Authority ordered the recovery of the demanded amount along with interest and penalties.
Displeased with the decision of the Adjudicating Authority, the Appellant filed an appeal before the Commissioner of GST & CE (Appeals), who, in the Impugned Order No. NSK/EXCUS/000/APPL/567/18-19 dated December 31, 2018, upheld the order of the Adjudicating Authority.
Challenging the Impugned Order, the Appellant filed an appeal before the CESTAT in Mumbai.
The Appellant argued that the Die Lube unit manufactured only excisable goods, not exempted goods, and the invoices related to the input services consumed in that unit were also in the name of the Appellant. Therefore, the CENVAT credit on those invoices cannot be questioned. The Appellant’s head office is not registered as an Input Service Distributor (“ISD”).
Furthermore, the Appellant contended that even if they are not registered as an ISD, the denial of CENVAT credit should not be justified. The Die Lube unit should be eligible for the credit that was availed by the Appellant, and there would be no loss to the revenue. Thus, it is a revenue-neutral case.
Issue:
Whether the Appellant is entitled for CENVAT Credit attribute to common input service utilized in its other unit as per the Cenvat Credit Rule?
Held:
The CESTAT, Mumbai in Excise Appeal No. 86235 of 2019 held as under:
