Order Date – 31 January 2023

Parties: M/s. Covestro (India) Private Limited Vs The Commissioner of G.S.T. and Central Excise

Facts – 

• The Appellant, M/s. Covestro (India) Private Limited, having head office at Thane, is engaged in the manufacture of excisable goods and are availing credit of inputs and capital goods, input services and Input Service Distributor credit under the CENVAT Credit Rules, 2004.
• The Head Office of the appellant is located in Thane, which is registered for ISD, for the distribution of ISD credit. There was an audit in respect of the Head Office-Thane Unit wherein it appears to the audit team of the Department observed that the distributor had distributed common credit amongst its three manufacturing units without considering the ISD unit (self), alleging that the Head Office-ISD Unit was also a service provider unit and this, according to the Revenue, had resulted in transfer of excess common CENVAT Credit to the other three units. 
• Consequence to the audit at head office, a show cause notice was issued on 24.06.2020 alleging inter alia that the appellant had availed excess amount of ineligible CENVAT Credit of Rs.9,83,069/- which was distributed by its ISD unit during April 2015 to June 2017 which was in contravention of the provisions of Rules 3 and 7 of the CCR, 2004.

Issue –

• Whether the disallowance of credit in the hands of the appellant was correct or not?

Order –

• The Tribunal observed that its Head office-ISD unit was regularly filing its ER-1 return, and the entire tax liability was paid in cash every year rather than paying through the CENVAT Credit.
• It was held that this is clearly a revenue neutral situation since there is no Revenue loss at all to the Government and hence, the question of wilful suppression, that too with an intent to evade payment of tax, etc., would never arise.
• Thus, the disallowance of CENVAT Credit is incorrect and the appeal is allowed.