2015 (10) TMI 1121 - AT - Central Excise

Denial of CENVAT Credit - CENVAT credit on the invoices issued by the Headquarters as ISD distributor as the Cenvatable documents issued by the Service provider are in the name of their Headquarters - Held that - It is the case of the appellant that no credit of inadmissible Services has been passed on by the ISD to the main appellant and where any such inadmissible credit was taken, the same was reversed. It is observed that the issue revolves around the fact whether Head Office of the main appellant has passed on the service tax credit only with respect to Services utilized in the manufacture of dutiable products. This can be done by the Adjudicating authority by getting the suitable verifications made with respect to service tax credit taken at the Headquarters of the main appellant. In view of the case laws relied upon by the appellant, reversal of inadmissible credit alongwith interest amounts to not taking the credit. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
- Distribution of CENVAT credit by the main appellant's Headquarters to its units.
- Admissibility of CENVAT credit on exempted services.
- Liability under Rule 6 of the Cenvat Credit Rules, 2004.

Analysis:

1. Distribution of CENVAT Credit:
The main appellant, along with its authorized signatory, appealed against Order-in-Original No. 26/DEM/VAPI/2011. The advocate for the appellants argued that the Headquarters distributed CENVAT credit to the Masat unit as an Input Service Distributor (ISD) without passing on any inadmissible credit. They contended that where inadmissible credit was taken, it was promptly reversed with interest. The advocate cited relevant case laws to support their argument. The Revenue, represented by the Authorized Representative, insisted that if credit on exempted services was passed on, the amount under Rule 6 of the Cenvat Credit Rules, 2004 should be paid.

2. Admissibility of CENVAT Credit on Exempted Services:
After hearing both sides and examining the case records, it was observed that the crux of the matter was whether the Head Office of the main appellant had only passed on service tax credit for services used in manufacturing dutiable products. The Tribunal noted that suitable verifications at the Head Office could determine this. Relying on the case laws presented by the appellant, the Tribunal concluded that reversing inadmissible credit with interest equated to not taking the credit at all. Consequently, the matter was remanded to the Adjudicating authority for factual verification and a fresh decision after providing the appellants with a chance for a personal hearing.

3. Liability under Rule 6 of the Cenvat Credit Rules, 2004:
The Tribunal allowed the appeals by remanding the case to the Adjudicating authority for further proceedings. The decision was made to ensure a thorough examination of the distribution of CENVAT credit and the admissibility of credit on exempted services, emphasizing the importance of factual verification and a fair opportunity for the appellants to present their case.

In conclusion, the Tribunal's judgment focused on the proper distribution of CENVAT credit by the main appellant's Headquarters, the admissibility of credit on exempted services, and the liability under Rule 6 of the Cenvat Credit Rules, 2004. The case was remanded for further proceedings to clarify these aspects and ensure a just decision based on factual verifications and legal principles.