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2014 (1) TMI 612 - AT - Service TaxAvailment of CENVAT credit of service tax - Input service Distributor (ISD) Waiver of Pre-deposit Held that - The service tax paid by ILTD and distributed to the factories relate to post threshing activities only has not been contradicted either by the Commissioner - the claim was made by the ITC Ltd. before the original authority and original authority has not got any verification done or has not contradicted this stand anywhere - In the absence of any evidence to show that credit distributed related to pre-threshing activities, the stand taken by the Revenue that the credit was not admissible therefore could not be distributed prima facie cannot be sustained - there is no evidence to show that ILTD is not a division of ITC Ltd. - ILTD can be considered a branch or an office of the manufacturer in terms of definition of Input Service Distributor - Prima facie, service tax credit would be admissible since the service relates to procurement of inputs which is one of the activities entered by definition of service tax - the appellant has made out a prima facie case in their favour Pre-deposits waived till the disposal Stay granted.
Issues:
Admissibility of CENVAT credit for service tax passed on by ILTD to ITC Ltd. Analysis: The appellant, engaged in manufacturing cigarettes and tobacco products, has a division called 'Indian Leaf Tobacco Division' (ILTD) responsible for procuring services related to supplying threshed tobacco to the manufacturing facilities. ILTD avails various services like storage, warehousing, transport, security, and accounting. ILTD registered as an Input Service Distributor in 2006. A show-cause notice was issued in 2011, challenging the admissibility of CENVAT credit for service tax passed on by ILTD from January 2006 to October 2010. The department argued that ILTD is an independent entity, not providing output services, and the credit passed on was for services used in manufacturing exempted goods. The impugned order denied the credit of service tax amounting to Rs. 3,25,80,308/-, demanding it with interest and penalty. The appellant contended that ILTD is not an independent entity but a division of ITC Ltd., as evidenced by the registration certificate. The credit passed on related to post-threshing activities, not pre-threshing, and was for services like storage and transportation, essential for manufacturing. They argued that ILTD is part of ITC Ltd., undertaking activities crucial for manufacturing cigarettes, making the credit admissible. The department, supported by the Commissioner, maintained that ILTD is independent, the credit is linked to manufacturing activities of exempted goods, ILTD cannot be seen as an office of ITC Ltd., and hence, the credit distribution was incorrect. They opposed the appellant's eligibility for waiver and stay. After considering both arguments, the Tribunal found that the service tax credit distributed by ILTD related to post-threshing activities, not contradicted by the department. There was no evidence to show that ILTD was not a division of ITC Ltd. The Tribunal accepted that ILTD could be considered a branch or office of the manufacturer, making the credit admissible. As a result, the Tribunal granted waiver of pre-deposit and a stay against recovery of dues during the appeal, finding a prima facie case in favor of the appellant. This judgment highlights the importance of establishing the relationship between entities, the nature of services availed, and the admissibility of credits under CENVAT rules. It clarifies the criteria for considering an entity as an Input Service Distributor and emphasizes the need for evidence to support claims regarding credit admissibility.
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