In a major relief to Hindustan Coca-Cola, the Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the obligation under rule 3(1) of CENVAT Credit Rules, 2004 cannot be transferred to the recipient of credit under rule 7 of CENVAT Credit Rules, 2004.
The bench of C J Mathew (Technical Member) has observed that the appellant, Hindustan Coca-Cola has merely utilized the credit and, to the extent that rule 3(4) of CENVAT Credit Rules, 2004 has not been shown to have been breached, is not concerned with the source of the credit.
The appellant, Hindustan Coca-Cola Beverages Pvt Ltd, Raigarh, is registered as ‘input service distributor (ISD)’ and had taken the disputed credit for being passed on, under the authority of rule 7 of CENVAT Credit Rules, 2004, to several undertakings of theirs among which the appellant herein was one.
Hindustan Coca-Cola Beverages, who had been proceeded against for recovery of ₹ 24,12,150 and ₹ 11,56,666 under rule 14 of CENVAT Credit Rules, 2004, along with interest thereon, for having utilized credit that did not conform to definition of ‘input service’ in section 2(l) of CENVAT Credit Rules, 2004 and confirmation by the original authority, having been upheld by Commissioner of GST & Customs (Appeals), Goa except to the extent of ₹ 19,159 for the period from June 2015 to March 2017 and ₹ 2,03,804 for April 2017 for the period to June 2017.
The appellant is before the Tribunal with the plea that the demand could not have been fastened on them as they were merely the recipients of distributed credit.
The appellant contended that demand cannot survive as they had merely topped up their accumulated credit from that assigned to them from the pool of the ‘input service distributor’ which they, then, utilized to discharge duties of central excise on goods manufactured by them. The incorrectness in availment, if any, could not be fastened on them as, in terms of rule 3 of CENVAT Credit Rules, 2004, they had not taken credit.
The appellant contended that both the discharge of tax liability by the ‘provider of service’ and availment by the ‘input service distributor (ISD)’ was not in question and that the challenge was primarily linked to an aspect, viz., nexus between the service so procured and the activity undertaken by them, which was not within the ambit of rule 7 of CENVAT Credit Rules, 2004.
The department contended that the proceedings had been initiated under rule 14 of CENVAT Credit Rules, 2004 against the appellant herein owing to incorrect utilization of credit and, consequently, correctly invoked against the appellant herein. He submitted that ‘input service distributor (ISD)’ system is merely a transit which does not cast any obligation that the distributor alone was to be tested for conformity with ‘input service’ as defined in rule 2(l) of CENVAT Credit Rules, 2004.
The department stated that the credit has to be accounted for only by the manufacturing unit or service providing unit which a ‘distributor’ is not.
The tribunal while allowing the appeal set aside the orders which were passed without authority of law.
Case Details
Case Title: Hindustan Coca-Cola Beverages Pvt Ltd Versus Commissioner of CGST & Customs
Case No.: Excise Appeal No: 85225 Of 2020
Date: 24/02/2025
Counsel For Appellant: Jitu Motwani
Counsel For Respondent: PK Acharya
