CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL HYDERABAD REGIONAL BENCH - COURT NO. – I Excise Appeal No. 21561 of 2015 (Arising out of Order-in-Original No.HYD-EXCUS-001-COM-032-14-15 dated 18.03.2015 passed by Commissioner of Customs, Central Excise & Service Tax, Hyderabad)

Commissioner of Central Excise .. APPELLANT Hyderabad - I Kendriya Shulk Bhavan, L.B. Stadium Road, Basheerbagh, Hyderabad, Telangana – 500 004.

VERSUS Gloster Cables Ltd., .. RESPONDENT Unit – 1, Survey No. 310/e, Nh-7, Kallakai Village, Toopran Mandal, Telangana – 502 319.

APPEARANCE:

Shri K. Raji Reddy, Authorized Representative for the Appellant.

Ms. P. Rosi Reddy, Advocate for the Respondent.

CORAM: HON’BLE Mr. A.K. JYOTISHI, MEMBER (TECHNICAL)

HON’BLE Mr. ANGAD PRASAD, MEMBER (JUDICIAL)

FINAL ORDER No. A/30029/2026 Date of Hearing: 20.08.2025 Date of Decision: 16.01.2026 [ORDER PER: ANGAD PRASAD]

This appeal has been filed by Department against the impugned order Order-in-Original No. HYD-EXCUS-001-COM-032-14-15 dated 18.03.2015, passed by Commissioner of Customs, Central Excise & Service Tax, Hyderabad.

2. The fact, in brief, respondent M/s Gloster Cables Ltd., were manufacturing various industrial cables and clearing on payment of excise duty. The appellant also availing Cenvat Credit on inputs and input services. They had two units namely, Unit-I and Unit-II. They were also having sales depots located across the country through which they sell their finished goods. The respondent took Cenvat Credit of Service Tax paid on services that were received by sales depots, head office and Unit-II at Kallakal village. The respondent took Cenvat Credit on services received at various places without registering as input service distributer under Rule 7 of Cenvat Credit Rules, 2004. The Show Cause Notice was issued vide OR No. 76/2014-HYD-I Adjn dated 03.09.2014 proposing to recover credit of Rs. 60,61,606/- during the period August, 2009 to August, 2012 as the said credit was not distributed through ISD registration and the procedure prescribed there under with regard to the proportion of credit to pass on basing on the turnover was not adhered to and not passing on the credit attributable credit to exempted turnover etc. Out of the said credit Rs. 9,38,768/- was taken without any invoices in addition to contravention on input service distributor.

3. The Commissioner of Central Tax, Hyderabad – I, vide Order-in- Original No. HYD-EXCUS-001-COM-032-14-15 dated 18.03.2015, dropped proposals for recovery of irregularly availed Cenvat Credit in respect of services used in Head Office/ Unit-II was not treated as a separate unit before their registration in January 2012 and held that before January 2012, there was only one unit and thus distribution of input service credit was not required. Learned Commissioner also refrained from imposing penalty on the General Manager of respondent.

4. On examination of the order by the Committee of Chief Commissioners, it was found that the order dropping the demand was not legal and proper. Thus, Department filed appeal before the Tribunal.

5. Learned AR submits that Rule 7 of Cenvat Credit Rules prescribes specific procedure for distribution of credit on input services used by Head Office/depots and units which is a mandatory requirement. One can distribute input service credit based on the turnover of the manufacturing units and that no credit can be passed on to the extent of services attributable to the exempted goods and services. Learned Commissioner ignored the restrictions and placed the respondent under Rule 7(b) of the Cenvat Credit Rules, 2004. The excise duty was exempted under Notification 214/1986 thereby goods manufactured in the Unit-II or job work unit were exempted making it ineligible for the Cenvat Credit on services.

6. Learned AR submits that Learned Commissioner observed in his order that Unit-II did not exist until November, 2011, but Unit-II existed, through not as registered unit under Central excise and enga