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2014 (12) TMI 450 - AT - Central ExciseDistribution of Cenvat Credit - ISD - Distribution of service tax credit to all units except the exempted unit - Held that - Rule 7(b) restricts distribution of CENVAT credit to the unit exclusively engaged in the manufacture of exempted goods or providing exempted services. I find that there is no prohibition in the said rule for distribution of CENVAT credit among the units, where both dutiable and exempted goods are manufactured. Further, no clarification with regard to the issue in hand has been furnished by the CBEC. Thus I am of the prima-facie view that the issue involved in the present case is a debatable one. However, considering the fact that substantial part of the demand has been paid by the applicant, the requirement of pre-deposit of the balance dues is waived till disposal of the appeal or for a period of 180 days from the date of this order, whichever is earlier - Stay granted.
Issues: Duty demand and penalty imposition on Input Service Distributor for distributing service tax credit to exempted unit not in conformity with Rule 7(b) of CENVAT Credit Rules, 2004.
In the present case, the issue revolved around the confirmation of duty demand and penalty imposition on the applicant, an Input Service Distributor (ISD), for distributing service tax credit to all units, including an exempted unit, not in line with Rule 7(b) of the CENVAT Credit Rules, 2004. The appellant argued that Rule 7(b) did not apply as the credit was not exclusively distributed to the exempted unit. It was highlighted that a substantial amount of duty and penalty had already been paid by the applicant following a stay order by the Commissioner (Appeals), a fact not disputed by the Additional Commissioner. Upon hearing both parties and examining the records, it was observed that Rule 7(b) restricted the distribution of CENVAT credit only to units exclusively engaged in the manufacture of exempted goods or services. However, there was no explicit prohibition for distributing credit among units manufacturing both dutiable and exempted goods. The absence of clarification from the Central Board of Excise and Customs (CBEC) on this matter led to the view that the issue was debatable. Consequently, considering the partial payment made by the applicant, the requirement for pre-deposit of the remaining dues was waived until the appeal's disposal or for a maximum of 180 days from the date of the order, whichever came first.
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