2010 (12) TMI 198 - AT - Service Tax

Cenvat credit - The appellants have taken credit in respect of advertisement and consulting engineer services and have utilized the same in respect of both their units - There is no provision in law for availing proportionate credit but the reversal was made at the instance of the Department. Subsequently, the Department has levied interest and penalty in respect of such reversal which in the first place was not required to be done - The only restrictions are that the credit should not exceed the amount of service tax paid and the second restriction is that the credit should not be attributable to services used in the manufacture of exempted goods or for providing of exempted services - he case of the Department is squarely covered by the ratio of the earlier decision of the Tribunal in the case of ECOF Industries (2009 -TMI - 75868 - CESTAT, BANGALORE). - Appeal are allowed

Summary

Issues:
Credit distribution between units of the same assessee, applicability of CENVAT Credit Rules, 2004, restriction on utilization of credit, interest and penalty imposition for reversal of credit.

Analysis:
The case involves a dispute regarding the distribution of credit between two units of the same assessee for advertisement and consulting engineer services. The appellants had initially taken credit for both units but later re-credited the amount for one unit as requested by the Department. The Department subsequently imposed interest and penalty for this reversal, which the appellants contested. The key argument raised was that there is no provision in the law for availing proportionate credit, and the reversal was done at the Department's instance. The appellants relied on the Tribunal's decision in the case of ECOF Industries Pvt. Ltd. Vs. CCE, Bangalore, which held that there are no restrictions on distributing service tax credit among various units of the same assessee as long as the credit does not exceed the service tax paid and is not attributable to exempted goods or services.

The Tribunal considered the provisions of the CENVAT Credit Rules, 2004 and noted that there is no explicit restriction on the amount of credit that can be distributed between different units of the same assessee. The Department's attempt to impose a restriction on the proportionate utilization of credit by each unit was found to be unjustified. The Tribunal also reiterated the applicability of its earlier decision in the case of ECOF Industries, which supported the unrestricted distribution of service tax credit among units of the same assessee. Consequently, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellants.

In conclusion, the judgment clarifies that under the CENVAT Credit Rules, 2004, there is no requirement for proportionate utilization of credit between units of the same assessee. The decision reinforces the principle that as long as the credit does not exceed the service tax paid and is not linked to exempted goods or services, the distribution of credit among different units is permissible. The Tribunal's ruling serves as a precedent for cases involving similar disputes over credit distribution within a multi-unit assessee structure.