2016 (2) TMI 590 - AT - Central Excise

Denial of CENVAT credit - whether Bangalore unit was not entitled to avail the entire CENVAT credit of service tax paid by them? - Held that - Admittedly both the units at Bangalore as well as at Hubli are the units of the same appellant and the credit availed by one unit could have been distributed to the other unit even though the services were not actually availed at that unit. This leads to the conclusion that either of the two units could have availed the entire credit. As such, it is of the view that denial of credit to the Bangalore unit is not justified. Otherwise also, as find that the appellant s unit is registered as LTU inasmuch as it is exercising administrative control as per the provisions of Rule 12A of the CENVAT Credit Rules 2004, the CENVAT credit lying at one unit can be transferred to the other unit. As such even if the credit was required to be taken at Hubli plant, the same could have been transferred to the Bangalore unit in terms of the said rule. As such, find no justification for denial of the credit to the appellant. - Decided in favour of assessee

Summary

Issues:
1. Denial of CENVAT credit to Bangalore unit for service tax paid on commissions.
2. Dispute regarding ISD registration and credit distribution between Hubli and Bangalore units.
3. Applicability of procedural conditions for availing CENVAT credit.
4. Transfer of credit between units under LTU registration.

Analysis:
1. The case involved the denial of CENVAT credit to the appellant's Bangalore unit for service tax paid on commissions without ISD registration. The Commissioner had denied the credit and imposed a penalty, prompting the appeal.

2. The appellant contended that as a Large Tax Payer Unit (LTU), they could transfer credit between units or distribute it through ISD registration. The dispute centered around whether the Bangalore unit could avail the credit without ISD registration and if the credit from the Hubli plant could be utilized without proper distribution.

3. The Tribunal examined previous decisions, emphasizing that ISD registration is a procedural condition that should not lead to the denial of substantive benefits. Citing cases like Doshion Ltd. Vs. CCE, Ahmedabad and others, it was established that credit distribution among units, even if services were not directly received, is permissible.

4. Considering that both Bangalore and Hubli units belonged to the same appellant, the Tribunal concluded that denial of credit to the Bangalore unit was unjustified. Additionally, under LTU registration, the transfer of credit between units was permissible, further supporting the appellant's claim for credit availability.

5. Ultimately, the Tribunal set aside the impugned order, allowing the appeal and providing consequential relief to the appellant. The decision highlighted the permissibility of credit transfer between units under LTU registration, reinforcing the appellant's entitlement to the credit.

6. As the appeal was allowed on merits, the issue of limitation was not addressed, and the decision was pronounced on 10-07-2015, in favor of the appellant.