Anglo French Drugs & Industries Ltd.
Commissioner of Central Excise, Bangalore
Stay Order No. 923 of 2010
Application No. E/ST/105 of 2010
Appeal No. E/195 of 2010
November 26, 2010
M.V. Ravindran, Judicial Member – When this matter was called out, we find that vide Note Sheet order dt. 2-8-2010, we had directed the Registry to list the Miscellaneous Application No. E/Misc./33/2010 for disposal along with the stay petition. On perusal of the cause list we find that the Registry has not listed the above Miscellaneous application. On specific query from the Bench, ld. Counsel submits that this miscellaneous application is for staying the operation of the impugned order pending disposal of the stay petition. Since the stay petition is listed today, this miscellaneous application is dismissed as infructuous. We find that the miscellaneous application No. E/Misc./372/10, is filed for seeking ad interim stay till the disposal of the stay petition. Since the stay petition is listed today, this miscellaneous application is also dismissed as infructuous.
2. This stay petition is filed for waiver of pre-deposit of the following amounts :-
(a) Credit – Rs. 81,90,451/-
(b) Credit – Rs. 34,17,855/-
(d) Penalty – Rs. 81,90,451/-
(e) Penalty – Rs. 2000/- u/r 15(3).
3. Heard both sides and perused the records.
4. The confirmation of demand on the appellant has arisen on the ground that the appellant herein had availed Cenvat credit of the input-service tax, distributed by Input Service Distributor (ISD). It is the finding of the ld. Adjudicating Authority that said credit is entitled to the appellant only if the appellant had got only one and not two manufacturing units and the Head Office, as an ISD has distributed the entire credit only to the appellant in Bangalore. ld. Counsel would submit that the entire case of the Revenue has proceeded on the ground that the ISD cannot distribute the credit for only one manufacturing premise, when they have various manufacturing units. He would also submit that the Adjudicating Authority has gone beyond the allegations made in the show-cause notice inasmuch as that the Adjudicating Authority has held that the input service credit distributed by the Head-office including the service tax credit availed on the trading activity. It is the submission that this allegation is not in the show-cause notice. As regards the distribution of service tax credit to only one manufacturing unit, he would submit that the decision of this Bench in the case of Ecof Industries (P.) Ltd. v. CCE  23 STT 381 (Bang. – CESTAT) would cover the issue.
5. Ld. DR would submit that the show-cause notice in para-2, it is mentioned that there being a trading centre in addition to manufacturing units. It is his submission that there is a mention of there being a trading centre and there would be service received on which the credit is availed and distributed by the Head Office would also include the service tax credit availed by the input credit distributor; It is his submission mat the service tax returns filed by the appellant does not disclose the amount of service tax credit availed on the trading activity, as it is a consolidated amount. He would submit that the distribution of credit of service tax on trading activity is a doubtful proposition. For this proposition, he would rely on the decisions of this Tribunal in the cases of Eveready Industries India Ltd. v. CCE 2010 (249) ELT 85 (Trib. – Chennai) and Colgate Palmolive (I) Ltd. v. CCE  12 STT 269 (Mum. – CESTAT).
6. We have considered the submissions made by both sides and perused the records.
7. On perusal of the records, we find that the entire allegation in the show-cause notice which was issued to the appellant reads as under:-
“3. In view of the above facts, it appears that the assessee has irregularly availed the input service credit on courier bills telephones, commission on import/insurance/exports etc. passed on from their head office without being distributed among all the manufacturing units as per Rule 7 of the Cenvat Credit Rules, 2004 during the period from September, 2008 to March, 2009, and the same is required to be recovered from them. Therefore, the irregular availment of credit of Rs. 34,17,855/- is recoverable from the assessee along with interest under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11A and Section 11B of the Central Excise Act, 1944. They are also liable for penalty under Rule 15(3) of Cenvat Credit Rules, 2004 for irregular availment of input service credit.”
8. Furthermore, it is seen that the Adjudicating Authority has not considered the legal proposition which has been settled by the Tribunal in the case of Ecof Industries (P.) Ltd. (supra). We find that the Adjudicating Authority has proceeded on the basis of provisions of Rule 7 and Board’s circular which according to him, the credit distributor should have distributed the service tax credit to all units. We find strong force in the contentions raised by the ld. Counsel that the decision of the Tribunal in the case of Ecof Industries (P.) Ltd. (supra) where the provisions of Rule 7 has been analysed in depth and has been settled that the ISD can distribute the credit even to only one unit. Prima facie, we find that the appellant has made out a case for the waiver of pre-deposit of the amounts involved. As regards the submissions made by the ld. Jt. CDR, we find that the appellant could not have availed credit of service tax paid on the trading activity distributed by the ISD and also find that this being a legal proposition can be considered at the time of final disposal of the appeal after considering the rival submissions. In view of the above, we allow the application for waiver of pre-deposit of the amounts involved and stay the recovery thereof till the disposal of the appeal.