2015 (6) TMI 692 - AT - Service Tax

Waiver of pre deposit - CENVAT Credit - invoices issued in the name of the Corporate Office and distributed the credit to various units under ISD invoices - according to the department, this service tax cenvat credit is in respect of the service which had been entirely used in the Vizag Unit and, therefore, the service tax credit in respect of this service which was received and used by Vizag Unit was not available to the appellant unit located at Bhilai Held that - There was no provision that the cenvat credit distributed by the Head Office as input service distributor should be in proportion to the turnover of the factories located at various places. Such restriction, was put after 31.3.2012. In view of this, prima facie, we are of the view that during the period till 31.3.2012, there was no irregularly in issuing of the ISD invoices by the Head Office to the appellant company passing on the cenvat credit in respect of the service which may have been used exclusively by the Vizag Unit. Such restrictions came only w.e.f 1.4.2012 and according to the ld. Counsel for the appellant, the credit distributed w.e.f. 1.42012 period is only about ₹ 11 Lakhs. Appellant unit would not be eligible for cenvat credit in respect of the invoices issued by Head Office during the period w.e.f. 1.4.2012. In view of this, we direct the appellant unit to deposit an amount of ₹ 12 lakh within a period of 6 weeks. - Partial stay granted.

Summary

Issues:
- Dispute over cenvat credit distribution by appellant's Head Office.
- Jurisdictional authority to adjudicate cenvat credit issue.
- Conditions for distribution of credit by an Input Service Distributor (ISD).

Issue 1: Dispute over cenvat credit distribution by appellant's Head Office

The appellant's unit in Bhilai availed cenvat credit based on ISD invoices issued by the Corporate Office in Hyderabad. The Department contended that the credit, amounting to Rs. 4,58,04,123, was used entirely by the Vizag Unit, making it ineligible for the Bhilai unit. The Commissioner confirmed the demand, imposing penalties. The appellant argued that until April 1, 2012, Rule 7 of the Cenvat Credit Rules had no provision restricting credit distribution based on factory locations. The Tribunal found no irregularity in the ISD invoices issued by the Head Office before April 2012. However, post-April 2012, restrictions were imposed. The Tribunal directed the appellant to deposit Rs. 12 lakh within six weeks, waiving the pre-deposit requirement for the remaining amount.

Issue 2: Jurisdictional authority to adjudicate cenvat credit issue

The appellant contended that the Commissioner in Raipur lacked jurisdiction to decide on the cenvat credit based on ISD invoices issued by the Head Office in Hyderabad. They argued that the Commissioner in Hyderabad was the competent authority. Referring to a Tribunal judgment, the appellant emphasized that only the Commissioner where the ISD is registered has the authority to decide on credit distribution. The Tribunal found that the Raipur Commissioner's jurisdiction was disputed, but the primary issue was the eligibility of the Bhilai unit for cenvat credit post-April 2012. The Tribunal directed the appellant to deposit a specified amount, irrespective of the jurisdictional concerns.

Issue 3: Conditions for distribution of credit by an Input Service Distributor (ISD)

The Tribunal noted that until March 31, 2012, Rule 7 of the Cenvat Credit Rules had two conditions for ISD credit distribution. There was no provision restricting credit distribution based on factory locations or turnover proportions. The Tribunal found that the restrictions were imposed post-April 2012. The appellant argued that only Rs. 11 lakhs of credit was distributed post-April 2012. The Tribunal held that the appellant was not eligible for cenvat credit for invoices issued by the Head Office post-April 2012. The Tribunal directed the appellant to deposit a specified amount within six weeks, waiving the pre-deposit requirement for the remaining balance.

In conclusion, the Tribunal addressed the cenvat credit dispute, jurisdictional concerns, and the conditions for ISD credit distribution, directing the appellant to deposit a specific amount within a stipulated period to resolve the issue effectively.