2015 (1) TMI 1093 - AT - Service Tax

Denial of CENVAT Credit - Transfer of credit - Service tax paid by the head office under reverse charge - Appellants were availing the CENVAT credit of the service tax so paid by the head office and distributed by them and were utilising the same for discharge of their service tax liability - Bar of limitation - Held that - On going through the provisions of Section 66, we find that the same is charging Section and provides for levy of service tax on the taxable services referred in Section 65(105). In respect of the services so specified in Section 65, clause 105, if provided by a person located in a country other than India and received by a person located in India, the same has to be treated as per Section 66A, as if the recipient of the services has himself provided the said services in India and he is required to pay service tax under Section 66A even though actually the said services do not stand provided by him. Merely because the recipient of the services in question has been made to be a deemed provider of such services, in terms of Section 66A, will not change the complexion of the said services from input services to output services for the purpose of Cenvat Credit Rules, 2004. If such services are otherwise used as input services by the manufacturer of an excisable product or provider of an output taxable service, the Cenvat credit of service tax paid by the service recipient would be available to him. A head office is entitled to get himself registered as input service distributor and then to issue invoices/bills for the purpose of distributing the credit of service tax. There is nothing in the said Rule to suggest that the head office or the office of the manufacturer should be himself in a position to provide any output service or to manufacture any excisable goods. The basic requisite condition for the distribution of the said credit is that he receives the invoices towards purchase of input services and pays the service tax. Admittedly, in the present case, the head office has received the disputed services of Intellectual Property Service , Consulting Engineering Service and Management Consultant Service and has discharged its service tax liability as a recipient of the said services. The head office is admittedly registered with the Department as input service distributor. Being a registered input service provider, the head office was admittedly entitled to distribute the credit to its manufacturing unit. If the appellants would have received the said services directly at their Nodia factory and would have paid the service tax themselves, they were admittedly entitled to the credit. Merely because the invoices by the foreign suppliers were raised in the name and address of the head office, who paid the entire consideration along with the service tax, credit cannot be denied on the said ground. It may be mentioned here that credit is available qua the manufacturer and not qua the factory. Admittedly, the manufacturer is M/s. Moser Baer India Ltd. Merely because their head office is located at a place different from the place of the factory cannot be adopted as a reason for denial of the credit. The factory as also the head office is belonging to the same manufacturer, i.e., M/s. Moser Baer India Ltd. and cannot be considered to be two separate entities. Otherwise also, it is a well settled law that the invoices raised in the name of the head office cannot be held to be a ground for denial of the credit. As such even if the head office was not registered as an input service distributor, the appellants factory located at Noida was entitled to the credit of the service tax paid by them through their head office, as all the accounts are being maintained at the head office. Demand to be barred by limitation. Admittedly, the head office was a registered input service provider and was issuing invoices to the factory for the purpose of availing the credit. The credit so taken by the appellants was being reflected in their statutory records. We really fail to appreciate the reasoning of the Commissioner that as the appellants were availing the credit on the strength of the documents/advices issued by their head office, but they were fully aware of the every aspect related to the payment of service tax being made by the head office. Inasmuch as the credit was being availed on the basis of the invoices issued by registered input credit distributor and were being reflected by the assessee in their statutory returns, we find that no positive suppression having the colour of mis-statement or with any mala fide can be attributed to them so as to invoke the longer period of limitation. Accordingly, we hold the demand as barred by limitation. - impugned order is set aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Entitlement to CENVAT credit by the head office as an input service distributor.
2. Distribution of CENVAT credit to the manufacturing unit.
3. Applicability of limitation period for the demand.

Issue-wise Detailed Analysis:

1. Entitlement to CENVAT credit by the head office as an input service distributor:
The appellants, manufacturers of CDR, CD Rom, DVDR, and DVD Rom, have their head office registered as an input service distributor under Rule 2(m) of the CENVAT Credit Rules, 2004. The head office received various services from foreign countries and paid service tax as a deemed service provider under Section 68(2) read with Rule 2(1)(d)(v) of the Service Tax Rules, 1994. The appellants availed CENVAT credit based on invoices issued by the head office. The Revenue contended that the head office, not being a manufacturer or provider of output services, was not entitled to avail and distribute the said credit. The judgment clarified that the head office, registered as an input service distributor, is entitled to distribute the credit of service tax paid on input services to the manufacturing unit, as per Rule 2(m) and Rule 7 of the CENVAT Credit Rules, 2004. The judgment emphasized that the head office's role as an input service distributor is valid and lawful, allowing the distribution of credit to the manufacturing unit.

2. Distribution of CENVAT credit to the manufacturing unit:
The services received by the head office were utilized by the appellants' factory in Noida. The judgment noted that the manufacturer is M/s. Moser Baer India Ltd., and both the head office and the factory belong to the same entity. It was highlighted that credit is available to the manufacturer, not the factory. The judgment referenced various Tribunal decisions, including TVS Motors Co. Ltd. v. CCE, Chennai and Ecof Industries Pvt. Ltd. v. CCE, Bangalore, which support the principle that credit can be availed by the factory based on invoices issued by the input service distributor. The judgment concluded that the appellants' factory was entitled to the credit of service tax paid by the head office, even if the head office was not directly engaged in manufacturing or providing output services.

3. Applicability of limitation period for the demand:
The judgment addressed the issue of limitation, noting that the head office was a registered input service provider and the credit availed was reflected in the statutory records. The Commissioner's reasoning for invoking the longer period of limitation was not accepted, as there was no positive suppression or mis-statement with intent to evade payment of duty. The judgment cited the Supreme Court decisions in Collector of Central Excise v. Chemphar Drugs & Liniments and Pushpam Pharmaceuticals Company v. CCE, Bombay, which established that invocation of the extended period requires positive suppression or mis-statement with an intent to evade duty. Consequently, the demand was held to be barred by limitation.

Conclusion:
The impugned order was set aside, and the appeal was allowed with consequential relief to the appellants on merits and limitation. The head office was entitled to distribute the CENVAT credit to the manufacturing unit, and the demand was barred by limitation due to lack of suppression or mis-statement.