2015 (1) TMI 1086 - AT - Central Excise

Denial of CENVAT Credit - Invoice in the name of branch office - Held that - In view of the fact that the branch offices have no separate accounting system and their accounts form part of the head office accounts, which is registered as an ISD, I hold that the appellant has rightly availed cenvat credit in respect of the services received at the branch office/regional office and consequently, their distribution in the manufacturing unit is also proper. I further hold that the Revenue has erred in disallowing the credit on misconception of the fact that the invoices are not in the name of the appellant-assessee. In the facts and circumstances, the invoices are found to be in the name of the assessee-company, issued to the branch offices. The payments are accounted at the head office which is registered as an ISD. The availment of credit and the distribution by the head office are legal and proper. Thus the appeal is allowed. The impugned order is set aside. The appellant will be entitled to consequential benefits in accordance with law. - Decided in favour of assessee.

Summary

Issues:
- Disallowance of Cenvat credit on inadmissible input service credits distributed by the head office registered as an input service distributor (ISD) to branch offices not registered as ISD.
- Imposition of penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise Act, 1944.

Analysis:
1. Issue 1: Disallowance of Cenvat Credit
- The appellant, engaged in manufacturing motor vehicle parts, availed Cenvat credit on inputs and input services for their final products. A show cause notice was issued due to inadmissible credit distribution by the head office to branch offices not registered as ISD.
- The Revenue alleged that the head office distributed inadmissible credits under ISD invoices, where service tax payments were made by branch offices. The appellant reversed the credit amount and paid interest, but the demand was confirmed with interest and penalty.
- The Commissioner (Appeals) upheld the rejection of Cenvat credit, stating that credit distribution must be to a registered ISD only. As invoices were in the branch office's name, credit could not be taken or distributed by the head office.
- The appellant contended that branch offices are extensions of the head office, with centralized registration and accounting. They argued that payments for services availed at branch offices were made by the head office, justifying credit availed by the head office.
- The Tribunal held that since branch offices had no separate accounting system and were part of the head office accounts, the appellant rightly availed Cenvat credit for services received at branch offices. The Revenue's disallowance based on invoice names was incorrect. The appeal was allowed, setting aside the impugned order.

2. Issue 2: Imposition of Penalty
- The penalty was imposed under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise Act, 1944. However, since the Tribunal allowed the appeal on the disallowance of Cenvat credit, the penalty imposition becomes irrelevant and is not sustained.
- The appellant is entitled to consequential benefits in accordance with the law as the impugned order is set aside, and the disallowed credit is now held to be legal and proper.

This detailed analysis highlights the core issues of disallowance of Cenvat credit and the subsequent decision by the Tribunal to allow the appeal based on the interrelation between the head office and branch offices in the context of Cenvat credit distribution.