S.S. Garg ORDER
S.S. Garg, Member (J)
1. The present appeal is directed against the impugned order dated 18.09.2019 passed by the Commissioner of Central Tax (Appeals) whereby the Commissioner has rejected the appeal of the appellant and confirmed the demand of Rs. 16,40,610/- under Rule 14 of CENVAT Credit Rules, 2004 read with Section 11A(4) of Central Excise Act, 1944 and also imposed penalty under Rule 15(3) of CCR, 2004 read with Section 11AC(1)(a) of Central Excise Act, 1944.
2. Briefly the facts of the present case are that the appellant is engaged in manufacture of automobile parts falling under Chapters 8413, 8411 and 8479 of Central Excise Tariff Act, 1985 and are also registered under Finance Act, 1994 as service provider and service receiver and input tax distributor. The appellant are also availing CENVAT credit on capital goods, inputs and input services and utilizing the same for payment of Central Excise duty. During the course of Audit undertaken by the Department, it was observed that the appellants have availed irregular CENVAT credit inasmuch as the appellants, as an ISD, failed to distribute credit on certain common input services. Accordingly, Audit Report No. 1082/2017-18 dated 03.04.2018 was issued to the appellants requiring them to reverse ineligible CENVAT credit of Rs. 16,40,610/- availed by them in violation of Rule 7 of CENVAT Credit Rules, 2004. The details of ineligible credit as mentioned in the audit report are tabulated below, bifurcated:
2.1. The appellants vide their letter dated 23.02.2018 submitted that all the 9 units are based in the State of Karnataka under one registration GSTIN 29AABCM8269R1ZF under GST Law and the appellants have filed Form GST TRAN-1 and have carried forward the balance CENVAT credit as available in their ER-1 and ST-3 Returns for the period up to June 2017 into their Electronic Credit Ledger; that even if the credits were to be distributed to the respective units, the same would have flown back into the Electronic Credit Ledger under the GST regime. The appellants also submitted in the reply that they are not liable to reverse credit as the overall exercise would amount to revenue neutrality.
2.2. Thereafter, a SCN dated 07.05.2018 was issued to the appellants on the grounds that the appellants were liable to distribute the credit of common input service to each of the recipient units as per the provisions of Rule 7 of CENVAT Credit Rules, 2004 read with sub-rule (2) of Rule 4A of Service Tax Rules, 1994, and that the appellants have availed the entire credit pertaining to common input services at their unit located at B-165 instead. The appellants vide their reply dated 03.10.2018 submitted that the proposal to demand CENVAT credit of Rs. 16,40,610/- is not sustainable as the entire exercise is revenue neutral and that the disputed credit has been carried forward in one common pool of transitional credit, under the GST regime; that the appellants are eligible for the credit of Rs. 1,22,145/- on common input services availed by all units which have been received from other service providers, including the appellants (the head office), to which they are eligible on a pro-rata basis. The Assistant Commissioner after following the due process vide Order-in-Original dated 10.01.2019 confirmed the demand of CENVAT credit and interest and penalty mainly on the ground that the appellants ought to have distributed credits on common input services as per the provisions of Rule