The Allahabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that Parle Mango Bite and Kismi Toffee manufacturer is entitled to cenvat credit.

The bench of P.K. Choudhary (Judicial Member) and Sanjiv Srivastava (Technical Member) has observed that Parle was justified in distributing credits on input services attributable to the final product on a pro-rata basis, proportionate to the turnover of each unit between the manufacturing plants Parle and its contract manufacturing units, including the appellant, under rule 7(d) of the CENVAT Rules.

The Appellant had undertaken manufacture of Parle Branded confectionaries as Contract Manufacturing Unit (CMU) on behalf of the principal M/s Parle Biscuits Pvt. Ltd. 

The activity of manufacture undertaken is as per clause (ii) of Notification No.36/2001-CE(NT) dated 26.6.2001 for which an authorization dated 17.4.2009 as required under said Notification has been filed with the jurisdictional ACCE. As per clause (ii) of Notification No.36/2001-CE(NT), the inputs, capital goods were procured by M/s Parle Biscuits Pvt. Ltd., the principal manufacturer, which were received in factory of Appellant directly from the manufacturer-suppliers on payment of excise duty for use in manufacture of confectionaries on behalf of principal.

In the Show Cause Notice, the allegation is that Cenvat Credit availed on ISD invoices of Principal Manufacturer M/s Parle Biscuits (P) Ltd. Mumbai during the period from April 2013 to September 2013 is in contravention of erstwhile Rule 7 of CCR, 2004 which allows distribution of cenvat credit by ISD to its manufacturing unit as the assessee is a separate entity and not a unit of Parle, hence proposal for recovery of wrongly availed cenvat credit along with interest and penalty was made.

The tribunal noted that the definition of ‘input service distributor’ under Rule 2(m) of CCR 2004 means office of manufacturer of final products which receives invoices towards purchase of input services for distribution of credit ‘to such manufacturer’ read with Rule 7 allowing distribution of credit to ‘manufacturing unit’, the credit taken is not deniable.

The court while allowing the appeal held that CENVAT is a beneficial scheme with the stated purpose of allowing CENVAT credit of all taxes paid on inputs and services so as to avoid cascading effect of taxes and duties. 42 Thus, even in terms of the provisions of Rule 2(m) and Rule 7 of the CENVAT Rules, as they stood prior to 01.04.2016, the appellant company can distribute CENVAT credit in respect of the service tax paid on inputs services to its manufacturing units, including a job worker.

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Case Details

Case Title:  M/s K N Food Industries Pvt. Ltd. Versus  Commissioner, CGST & Central Excise, Kanpur

Case No.: Excise Appeal No.70720 of 2018

Date: 16.01.2025

Counsel For Appellant: Rinki Arora

Counsel For Respondent: Santosh Kumar