Case Law Details
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”).
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