2015 (1) TMI 182 - AT - Service Tax

CENVAT Credit - credit available to one unit availed by another unit - Investor Consultancy Services - Held that - According to Rule 12A of Cenvat Credit Rules, any branch of LTU can transfer the Cenvat credit to other branches of the same company without any limit. However we find that the procedure followed by the appellants in availing the entire credit in one unit whereas the same was attributable to all the units may not be correct procedurally. However this would be only a procedural infraction and may not call for denial of the entire Cenvat credit availed by the appellants. Therefore we find that appellants have made out a prima facie case for waiver of pre-deposit and stay against recovery. Accordingly the application for waiver of pre-deposit and stay against recovery is allowed during the pendency of appeal - Stay granted.

Summary

Issues:
1. Availment of service tax credit on input services for different activities.
2. Objection by revenue regarding credit utilization in a specific unit.
3. Review of the original adjudicating authority's decision.
4. Denial of credit, imposition of interest, and penalty by the Commissioner.
5. Interpretation of Rule 12A of Cenvat Credit Rules regarding credit transfer within LTU branches.
6. Procedural infraction in availing credit in one unit instead of distributing it among all units.
7. Consideration of waiver of pre-deposit and stay against recovery during the appeal.

Analysis:
1. The appellant availed service tax credit on input services related to raising equity capital, Investor Consultancy Services, and acquiring another company between May 2006 and December 2006, utilizing the credit in Unit I engaged in manufacturing operations. The revenue objected to this, citing that the credit was not directly linked to services received in Unit I, raising concerns about the procedural correctness.

2. Initially, proceedings were dropped by the original adjudicating authority, advising the appellant to register the registered office as an 'Input Service Credit Distributor' for future compliance. However, the Commissioner reviewed this decision, issuing a show cause notice under Section 84 of the Finance Act, 1994. Subsequently, the Commissioner denied the credit, imposed interest, and penalties on the appellant.

3. The Tribunal analyzed Rule 12A of the Cenvat Credit Rules, highlighting that any branch of a Large Taxpayer Unit (LTU) can transfer credit to other branches without limitations. While acknowledging a procedural error by the appellant in concentrating the credit in one unit instead of distributing it among all units, the Tribunal deemed it a procedural infraction rather than a basis for complete denial of the availed credit.

4. Consequently, the Tribunal found that the appellant had established a prima facie case for waiver of pre-deposit and stay against recovery during the appeal process. Therefore, the application for waiver of pre-deposit and stay against recovery was granted, allowing the appellant relief during the pendency of the appeal proceedings.