2015 (12) TMI 215 - AT - Service Tax

Distribution of input services of Banking and financial services - Passing of credit - Held that - zonal office was not registered as ISD at the material time, they were not eligible to pass on credit to their respective branches - credit could be taken on the basis of laid down procedure. Once Bank was not registered as ISD, they were not authorized to pass on any credit. Revenue also pointed out that the decision of the Tribunal in the case of Khaitan Electricals Ltd. v. CCE, Kolkata-VI - 2010 (11) TMI 79 - CESTAT, KOLKATA wherein the depot was not registered as an input service distributor, the appellants were not entitled for credit at Kolkata unit which was in respect of service received by the depot at Jaipur. - Decided in favour of Revenue.

Summary

Issues:
1. Failure of respondent to appear in court for hearings.
2. Eligibility of zonal office of a bank to pass on credit to branches as Input Service Distributor (ISD).
3. Interpretation of Rule 3 of RSCP Rules regarding ISD registration.
4. Comparison with a similar case law regarding entitlement to credit.

Issue 1 - Failure to Appear in Court:
The respondent repeatedly failed to appear in court despite multiple adjournments, indicating a lack of interest in pursuing the judicial process. The court proceeded with the hearing in the absence of the respondent, with the assistance of the learned DR.

Issue 2 - Eligibility of Zonal Office as ISD:
The Commissioner (Appeals) had allowed the appeal of the respondent, stating that the zonal office was registered under Banking and Financial Services, hence eligible to pass on credit to their branches. However, the department contested this decision, arguing that since the zonal office was not registered as an ISD, they were not authorized to pass on any credit. The Revenue cited a relevant case law to support their contention, emphasizing the importance of following the laid down procedure for claiming credit.

Issue 3 - Interpretation of RSCP Rule 3:
The Commissioner's analysis highlighted the requirement of zonal offices to be registered as ISD under Rule 3 of RSCP Rules to pass on credit. The decision emphasized that without ISD registration, the zonal office could not transfer credit to their branches, thus upholding the department's argument regarding the ineligibility of the zonal office to pass on credit.

Issue 4 - Comparison with Case Law:
The judgment referenced a previous case involving a depot not registered as an ISD, where the appellants were denied credit. Drawing parallels, the court found that the case law supported the Revenue's contention, strengthening the decision to allow the appeal filed by the Revenue.

In conclusion, the court allowed the appeal filed by the Revenue, emphasizing the importance of adherence to registration requirements for claiming credit as an ISD. The judgment highlighted the significance of following established procedures and rules in matters concerning credit entitlement and distribution within the banking and financial services sector.