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2015 (8) TMI 346 - AT - Central ExciseDenial of CENVAT Credit - distribution of credit by the Input service distributor (ISD) - Manufacture of exempted goods - Imposition of penalty - whether the credit availed by the appellant is in respect of exempted goods i.e. crude oil etc. is admissible - Held that - credit can be allowed in respect of services received by the input service distributor before the registration under input service distributor and distributed the same after the registration. - though the crude oil may be exempted but the same is used in the further process as intermediate products in the appellant s own factory and the resultant final product is dutiable, the Hon ble High Court held that the appellant are entitled for Cenvat credit. However, The Hon ble High Court has remanded the matter only to decide the issue that whether the credit can be availed on the input service distributor s invoices issued in respect of service received by the input service distributor prior to the registration as input service distributor. Input service distributor should receive invoices under Rule 4(a) of the Service Tax Rules, 1994 towards purchase of inputs services and issues invoices for the purpose of distribution of credit of service tax paid on the said service to such manufacturer or producer or provider, as the case may be. The Rule 2(m) does not stipulates any condition that the invoices issued under Rule 4(a) in respect of purchase of input service should pertain to period prior to the registration or after registration. Therefore it is clear that the purchase of input service by the office of the manufacturer maybe for the period prior to the registration and because of this reason there is no prohibition in the above Rule 2(m) for distributing services and issuance of input service distribution invoices. - services on which the Cenvat Credit was taken by the appellant have been admittedly received and used in or in relation to the manufacture of the dutiable final product which has been observed by the Hon ble High Court also. Therefore, foremost condition is, input should be received by the appellant and same should be used in or in relation to the manufacture of their dutiable final product is not under dispute. Appellant has availed credit on invoices issued by the input service distributors under Rule 4A, therefore the documents on which credit was taken is the documents covered under the above rule therefore invoices received by the appellant is not under dispute. As regard the input service distributor they are supposed to take credit on invoices issued by provider of input service. In the present case this is also not under dispute that the input service distributor has taken credit on the invoices issued by the service provider. Therefore the documents i.e. invoices issued by input service distributor could not be said to have been issued illegally - Input service was received by the appellant, input service covered by the said invoices has been used in or in relation to the manufacture of dutiable final product. In these facts, we find no fault or contravention of the provisions on the part of the appellant therefore Cenvat credit, irrespective any discrepancy, if any found on the part of the input service distributor, Cenvat Credit to the appellant cannot be denied on the ground that input service distributor have received services prior to the obtaining registration as input service distributors. Invoices issued by input service distributor is in the capacity registered of input service distributor. Therefore facts are different firstly it relates to the unregistered dealer and secondly receipt of inputs and dealers are different entities. In the present case the input service distributor is not different entity, it is part of the same entity and invoices were issued only after obtaining registration therefore facts of this case are entirely different, hence the Balmer Lawrie & Co. Ltd. (2000 (1) TMI 74 - CEGAT, NEW DELHI ) judgment cannot be made applicable in present case. As regard various judgments, Eagle Flask Industries Limited and Hari Chand Shri Gopal (1992 (5) TMI 19 - SUPREME COURT OF INDIA) cases on the issue that condition provided for availing any benefit has to be strictly complied with, in absence of the same, benefit provided under scheme cannot be extended to the assessee. - there is no even procedural lapse on the part of the appellant, Cenvat credit taken on the invoices issued by registered input service distributor is correct and legal - appellant has correctly availed the Cenvat Credit on the strength of invoices issued by input service distributors and we do not find any fault - Decided in favour of assessee.
Issues Involved:
1. Denial of Cenvat Credit on input services used in the manufacture of exempted goods. 2. Eligibility of Cenvat Credit for services received prior to ISD registration but distributed post-registration. Issue-wise Detailed Analysis: 1. Denial of Cenvat Credit on Input Services Used in the Manufacture of Exempted Goods: The Tribunal initially upheld the denial of Cenvat Credit on the ground that the input services were used exclusively for the production of exempted crude oil at Mumbai Offshore. The Tribunal's decision was based on the interpretation that since the crude oil was exempted, the credit could not be availed at the Uran factory. However, the Bombay High Court reversed this decision, emphasizing that the definition of "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004, is broad and includes services used "directly or indirectly, in or in relation to the manufacture of final products." The High Court clarified that the input services used at Mumbai Offshore are integral to the manufacturing process of dutiable final products at the Uran plant. Thus, the credit is admissible as long as it is used in the manufacture of dutiable goods, despite the intermediate product (crude oil) being exempt. 2. Eligibility of Cenvat Credit for Services Received Prior to ISD Registration but Distributed Post-Registration: The core issue was whether the appellants could avail Cenvat credit on input services received by administrative divisions before their registration as Input Service Distributors (ISD) but distributed after obtaining ISD registration. The Tribunal, following the High Court's remand, analyzed the relevant statutory provisions and precedents. Rule 2(m) of the Cenvat Credit Rules, 2004, defines an ISD as an office that receives invoices for input services and issues invoices for distributing the credit. The rules do not explicitly restrict the distribution of credit for services received prior to ISD registration. The Tribunal referred to several judgments, including Dagger Forst Tools Ltd., which held that there is no time limit for availing Cenvat credit on service tax paid on input services. The Tribunal emphasized that procedural lapses, such as delayed ISD registration, do not warrant denial of credit if the services were received, tax was paid, and the services were used in the manufacture of dutiable goods. The Tribunal concluded that the appellants correctly availed Cenvat credit on the strength of invoices issued by registered ISDs, even for services received before ISD registration. The procedural requirement of ISD registration does not affect the substantive right to credit as long as the core conditions (receipt of service, payment of tax, and use in manufacturing dutiable goods) are met. Conclusion: The Tribunal allowed the appeal, setting aside the denial of Cenvat credit and emphasizing that procedural lapses should not impede the substantive entitlement to credit. The decision underscores the broad interpretation of "input service" and the importance of substantive compliance over procedural formalities in the context of Cenvat credit.
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