C.C.E. - Bhopal vs Rohit Surfactants Pvt. Ltd.

The facts leading to this appeal by the Revenue are in brief as under:-

1.1 The Respondent are a unit located at Plot No. 11-24, Sector B, MP AKVN, Growth Centre, Sidhgaon, Sagar (M.P.). They are engaged in the

manufacture of Soap and Detergent Powder. Their head office is situated at Kanpur and there are other units of the Respondent Company engaged in

the manufacture of soap and detergent powder which are located at Alwar (Rajasthan), Bhogonipur (Kanpur), Rania (Kanpur), Sahibabad (UP), Dhar

(Pithampur), Chowbeypur (Kanpur), Sagar (M.P.) etc. All these units including the Respondent Company are using Ghari Brand on the soap and

detergent powder manufactured by them. The Ghari Brand being used by the Respondent Company belongs to M/s. Ghari Industries Pvt. Ltd.,

Kanpur, who charge royalty from the Respondent Company for using their brand name. M/s. Ghari Industries Pvt. Ltd. have paid service tax on the

royalty received from the Respondent Company for using their brand name and in this regard, they have issued invoices to the Respondent Company

at the address of their head office. The head office of the Respondent Unit during the period of dispute distributed the service tax credit for which

they have registration and issue invoices to the various manufacturing units including the Respondent unit. The total Cenvat Credit of service tax paid

by M/s. Ghari Industries Pvt. Ltd. on IPR Service, passed on by the Respondent Company to the Respondent Unit during the period 2006-2007 is

Rs.2,25,470/-.

1.2 The Department examined the records of IPR service provider M/s. Ghari Industries Pvt. Ltd. and found that they had paid service tax by utilizing

the Cenvat Credit of GTA service and according to the Department, the credit of the GTA service received by them could not be utilized towards the

payment of service tax on the IPR service, as GTA services cannot be input for “Intellectual Property Right†service. Accordingly the Additional

Commissioner vide order-in-original No. 02/Addl. Commr./ST/2007 dt. 12.10.2007 confirmed the service tax demand of Rs.20,16,879/- and Ed. Cess

of Rs.40,338/- against M/s. Ghari Industries Pvt. Ltd. for the period of Oct.05 to March, 06 on the ground that this much amount of service tax was

wrongly paid by M/s. Ghari Industries Pvt. Ltd. by utilizing the Cenvat Credit of GTA service received. The Department accordingly took the view

that to the extent the service tax on IPR service was wrongly paid by M/s. Ghari Industries Pvt. Ltd, the Respondent would not be eligible for Cenvat

Credit. It is on this basis that Jurisdictional Assistant Commissioner vide order-in-original dt. 22.04.08 confirmed Cenvat Credit demand of

Rs.2,25,470/- against the Respondent Unit along with interest thereon and imposed penalty of equal amount on them under section 15 of the Cenvat

Credit Rules, 2004.

1.3 On appeal being filed to the Commissioner (Appeals) against this order, the Commissioner (Appeals) vide order-in-appeal dt.15.07.08 set aside the

Assistant Commissioner’s Order against which this appeal has been filed by the Revenue.

Heard both the sides.

Sh. Amresh Jain, learned DR, assailed the impugned order by reiterating the findings of the Commissioner. He pleaded that when service tax has

been wrongly paid by M/s. Ghari Industries Pvt. Ltd. on IPR service provided by them to the Respondent in as much as the same was wrongly paid

by utilizing the GTA service Credit, the Respondent Unit would not be eligible for Cenvat Credit, as the service tax wrongly paid by utilizing the

Cenvat Credit has to be treated as no payment of service tax, and that in view of this, the impugned order is not correct.

Sh. A.K.Mathur, Advocate, the learned counsel for the Respondent, pleaded that just because there is dispute over mode of payment of service tax

by M/s. Ghari Industries Pvt. Ltd., whether through Cenvat Credit or through PLA, the Cenvat Credit of the Service tax paid by M/s. Ghari Industries

Pvt. Ltd. and which is reflected in the invoices issued by them, cannot be denied to the Respondent, that this is not a case of where service tax paid by

M/s. Ghari Industries Pvt. Ltd. has been refunded to them, that when there is no variation in the quantum of service tax paid by M/s. Ghari Industries

Pvt. Ltd., the Cenvat Credit available to the Respondent cannot be varied and that in view of this, there is no infirmity in the impugned order.

We have considered the submissions from both the sides and perused the records. There is no dispute that Respondent Company had availed the

service of “Intellectual Property Rights†from M/s. Ghari Industries Pvt. Ltd. by using their brand name “Ghari†on the detergent and soap

manufactured by them, for which they had paid royalty to M/s. Ghari Industries Pvt. Ltd. and M/s. Ghari Industries have paid service tax on that

amount and have reflected the same in the invoices issued by them. The dispute is over the mode of payment of service tax by M/s. Ghari Industries

Pvt. Ltd. whether through Cenvat Credit of GTA service or through PLA. In our view so long as the service tax payment by the service provider has

not changed and no part of the service tax paid by him has been refunded to him, the Cenvat Credit on the basis of the invoices issued by the service

provider cannot be denied to the service recipient. Even if there is dispute over the mode of payment of service tax by the service provider alleging

that the service tax has been paid by wrong utilization of Cenvat Credit, this is not the ground on which the Cenvat Credit can be denied to the service

recipient who had availed the Cenvat Credit on the basis of the invoices issued by service provider. The only situation in which the Cenvat Credit

could be denied to the service recipient is when the service tax paid by the service provider and whose Cenvat Credit taken by the service recipient

has been refunded to the service provider. But this is not the situation in this case. In view of this, we do not find an infirmity in the impugned order.

The Revenue’s appeal is dismissed.