By TIOL News Service

MUMBAI, DEC 19, 2016: THE appellant is manufacturing sugar confectionery and chocolates.

They availed the CENVAT Credit in respect of services distributed by their Head Office under a cover of invoice whereas the service was attributed to the product manufactured in different factories, that is, Nescafe and Maggie Noodles.

The department viewed that as the service tax paid on advertising, event management etc. is not related to the product namely sugar confectionery, chocolates manufactured in the appellant's factory, therefore, they are not entitled to CENVAT credit.

As the lower authorities denied the credit, the appellant is before the CESTAT.

The appellant submitted that there is no restriction for distribution of the credit to a factory where the services are not related;that there is no one to one correlation provided under the law; that there is no dispute that the services are tax paid and received by the Head Office. Reliance is placed on the following cases in support of their claim for credit viz. ECOF Industries Pvt. Ltd. - 2011-TIOL-770-HC-KAR-ST, Doshion Ltd. - 2012-TIOL-1716-CESTAT-AHM, Ultratech Cement Ltd. - 2010-TIOL-745-HC-MUM-ST, Hardik Founders &Engineers Pvt. Ltd. - 2016-TIOL-925-Cestat-Mum.

The AR while reiterating the findings of the impugned order submitted that the input service is related to the product Nescafe and Maggie Noodles which are not manufactured in the appellants' factory but in different factories situated at different locations, therefore, there is a clear violation of the provisions of Rule 2(l)(ii). Reliance is placed on the decision in Nitco Limited = 2014-TIOL-734-HC-MUM-ST.

The CESTAT observed -

++ The fact is not under dispute that services were not used in the factory of the appellant but it is related to the product Nescafe and Maggie Noodles which are manufactured in the appellant company's different factory. As regard the provision for distribution of the credit, there is no condition of one to one correlation between the credit distributed and the quantum of service received and used by a particular factory. Though the service is related to the product which is manufactured in the appellants company in other factories, but all the factories belonging to one company and in the absence of any provision of one to one correlation, the credit can be distributed to any factory of one company.

Placing reliance on the decision in Ecof Industries Pvt. Ltd. the Bench concluded that even though the service is not used in the appellants' factory but received and used in different factory of the same company, credit cannot be denied.

The appeal was allowed.

(See 2016-TIOL-3263-CESTAT-MUM)