2014 (1) TMI 1804 - AT - Central Excise

CENVAT credit - scope of SCN - Held that - Since the SCN did not consider or did not state that the services were received by an unit providing exempted service or manufacturing exempted goods; or the credit was in excess of the service tax amount paid, the credit could not have been denied on any other ground - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of CENVAT credit for service tax paid in respect of services rendered at a specific location.
2. Interpretation of Rule 7 of CENVAT Credit Rules, 2004 regarding the distribution of service tax credit by an Input Service Distributor (ISD).
3. Denial of credit based on the lack of nexus between the products manufactured and services received.

Analysis:
1. The appellant, a manufacturer of excisable goods, availed CENVAT credit for service tax paid in relation to services provided at a particular location. The dispute arose as the department contended that the credit could not be claimed since the services were not received at the unit where credit was availed.

2. The appellant's counsel argued that Rule 7 of CENVAT Credit Rules, 2004 imposes restrictions on the distribution of service tax credit by an ISD. The two restrictions mentioned are that the credit distributed should not exceed the amount of service tax paid in the invoices, and credit for services received in a unit engaged in manufacturing exempted goods or services cannot be distributed. As these allegations were not present in the show-cause notice, the appellant's credit claim was deemed valid.

3. Upon review of the relevant documents and arguments from both parties, the judge found no evidence supporting the denial of credit based on the grounds specified in Rule 7 of CCR. The denial was primarily due to the perceived lack of connection between the products manufactured by the appellant and the services received at the specified location. The judge opined that such a basis for rejecting credit was unfounded. As the show-cause notice did not mention any other valid grounds for denial, the judge allowed the appeal and granted consequential relief to the appellant.

In conclusion, the judgment revolved around the correct interpretation and application of Rule 7 of CENVAT Credit Rules, 2004 in the context of distributing service tax credit by an ISD. The judge emphasized the importance of adhering to the specific restrictions outlined in the rule and ruled in favor of the appellant due to the absence of valid grounds for denying the credit claimed.