2010 (12) TMI 490 - AT - Service Tax

Waiver of pre-deposit - Cenvat credit - Documents for availing cenvat credit - The question arises as to whether during the period from 10-9-04 to 6-6-05 Cenvat credit could be taken on the basis of invoice, bill or challan issued by an Input Service Distributor. From a reading of Rule 9(1)(g) readwith Rule 2(m) of CCR, 2004 and Rule 4 and Rule 4A(2) of the Service Tax Rules, 1994, are of the prima facie view that during this period, there was no provision that an Input Service Distributor before issuing an invoice, bill or challan had to obtain registration or that without such registration he cannot issue such invoices - Therefore, of prima facie view that Cenvat credit during the period of dispute cannot be denied to the appellant just because their Delhi office had not obtained service tax registration. Back dating of invoices - the invoices by Delhi office as ISD had been issued much later in back date - in view of allegation of back dating of the invoices issued by Head Office as ISD, which appears to have some substance, this is not a case for total waiver.

Summary

Issues Involved:
1. Validity of Cenvat credit taken based on invoices issued by the head office before obtaining ISD registration.
2. Imposition of penalty under Rule 15 of CCR, 2004 read with Section 11AC of CEA, 1944.
3. Imposition of penalty under Rule 26 of Central Excise Rules, 2002 on individual finance managers.
4. Admission of additional evidence (Chartered Accountant's certificate).

Detailed Analysis:

1. Validity of Cenvat Credit Taken Based on Invoices Issued by the Head Office Before Obtaining ISD Registration:
The appellant company, engaged in manufacturing aerated waters and mineral water, availed Cenvat credit on service tax paid on input services. The issue arose when the head office issued invoices for passing on service tax credit to the manufacturing unit before obtaining ISD registration on 26-5-06. The department alleged that the credit taken was incorrect as the invoices were issued without ISD registration. The appellant argued that the head office and factory are parts of the same company, and the services were indeed received. They contended that there was no requirement for ISD registration to issue invoices under Rule 4A(2) of the Service Tax Rules, 1994, and that the mechanism for ISD registration was only notified on 7th June 2005. The tribunal noted that during the period from 10-9-04 to 6-6-05, there was no provision requiring an ISD to obtain registration before issuing invoices. Therefore, prima facie, the credit could not be denied merely because the head office had not obtained ISD registration during this period.

2. Imposition of Penalty Under Rule 15 of CCR, 2004 Read with Section 11AC of CEA, 1944:
The department imposed a penalty on the appellant company under Rule 15 of CCR, 2004 read with Section 11AC of the Central Excise Act, 1944. The appellant argued that there was no mala fide intention, and the services were indeed received. They also highlighted that the credit was declared in the ER-1 returns, and no objections were raised initially. The tribunal, while acknowledging the appellant's arguments, directed a partial pre-deposit, indicating that the matter required further examination during the regular hearing.

3. Imposition of Penalty Under Rule 26 of Central Excise Rules, 2002 on Individual Finance Managers:
Penalties were also imposed on Shri Sandeep Bahl and Shri Vishal Agarwal under Rule 26 of the Central Excise Rules, 2002. The appellant contended that there was no justification for these penalties as there was no mala fide intention. The tribunal did not provide a detailed analysis specific to this issue but included it in the overall consideration of penalties and pre-deposit requirements.

4. Admission of Additional Evidence (Chartered Accountant's Certificate):
The appellant sought to admit a Chartered Accountant's certificate dated 22-3-2010 as additional evidence, certifying that no excess credit was taken. The tribunal dismissed this miscellaneous application, agreeing with the department that the certificate was not available before the adjudicating authority and could not be admitted at this stage.

Conclusion:
The tribunal directed the appellant to deposit Rs. 60 Lakhs within eight weeks, with the balance amount of Cenvat credit demand, interest, and penalty waived pending the disposal of the appeal. The tribunal emphasized that the issue of backdating invoices required further examination during the regular hearing. The miscellaneous application for additional evidence was dismissed, and the penalties imposed on the individual finance managers and the company were partially upheld pending further review.