2020 (3) TMI 1304 - AT - Service Tax

100% EOU-EHTP - distribution of credit of input services - HELD THAT - It is not in dispute that the subject services have been procured by the appellants for use in manufacturing their final products and further, there is no dispute with regard to payment of service tax on the subject input services of which credit has been availed/distributed by the appellant. In so far as the distribution of credit prior to the period when ISD registration was obtained, we find that the issue is no longer res integra inasmuch as the Hon ble Gujarat High Court in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS DASHION LTD 2016 (2) TMI 183 - GUJARAT HIGH COURT has clearly decided the issue in favour of assessee to hold that mere non-obtaining of the registration as ISD cannot disentitle the assessee from claiming the credit and the same is purely a procedural lapse which is curable in nature. In the instant case, the appellant has obtained ISD registration though belatedly. However, the same cannot be the reason to deny the credit and therefore, by respectfully following the decision of the Hon ble High Court, we are inclined to allow the credit on the said count. In so far as the invoices addressed to the units other than assessee s ISD unit, there is no dispute that the subject input services have been received and tax has been duly paid thereon. The assessee s entitlement of credit and distribution thereof has been decided by the High Courts and the Tribunal in the decisions referred supra wherein it has been held substantial benefit of credit should not be denied on technical and procedural grounds - the credit is otherwise eligible even if the export goods are exempted from payment of duty inasmuch as the intention of the Government is to export the goods and not the taxes. Therefore, there is no reason to deny credit on exempted goods which are exported outside India and hence, we uphold the appellant s eligibility to avail credit in the instant case. Denial of credit on services like catering, C F services, freight on exported goods, travelling and vehicle maintenance services - HELD THAT - No restriction was placed in the definition of input services as was applicable during the impugned period. The definition appearing under Rule 2(l) of the Credit Rules was very wide covering within its ambit all the services which are used in or in relation to manufacture of final products. No exclusion was provided in the definition to deny the credit on aforesaid services. In so far as catering services, the decisions rendered for the period prior to amendment made in March, 2011 as also relied by the appellant, in the case of THE COMMISSIONER OF CENTRAL EXCISE VERSUS M/S. BHARATH HEAVY ELECTRICALS LTD., THE CUSTOMS, EXCISE SERVICE TAX APPELLATE TRIBUNAL 2016 (3) TMI 441 - MADRAS HIGH COURT and THE COMMISSIONER OF CENTRAL EXCISE VERSUS M/S. BHARATH HEAVY ELECTRICALS LTD., THE CUSTOMS, EXCISE SERVICE TAX APPELLATE TRIBUNAL 2016 (3) TMI 441 - MADRAS HIGH COURT , the issue has been decided in favour of the assessee. There are no reason to deny credit availed by the appellant in the instant case and hence, we uphold the appellant s eligibility to avail credit. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Entitlement of appellant to distribute credit of input services; Denial of credit due to invoices addressed to units other than ISD unit; Denial of credit on services for EHTP unit manufacturing exempted goods; Denial of credit on specific services like catering, C&F services, freight on export, travel expenses, and vehicle maintenance expenses.

Entitlement of appellant to distribute credit of input services:
The judgment involved appeals by M/s. Hical Technologies Pvt. Ltd. regarding Show Cause Notices issued for the period October 2010 to January 2011. The issue revolved around denial of Cenvat credit on various grounds, including distribution of credit before ISD registration, invoices addressed to different units, and credit on specific services. The appellant, engaged in camera manufacturing, obtained ISD registration and faced challenges on credit distribution. The Tribunal cited precedents, like Doshion Ltd. case, emphasizing that procedural lapses like delayed ISD registration should not disentitle credit if goods/services and tax payment are valid.

Denial of credit due to invoices addressed to units other than ISD unit:
Regarding invoices addressed to units other than the ISD unit, the Tribunal noted that the appellant received services, paid taxes, and the entitlement to credit was upheld in previous decisions. Upholding the appellant's credit eligibility, the Tribunal emphasized that substantial benefits of credit should not be denied on technical or procedural grounds, aligning with judicial precedents.

Denial of credit on services for EHTP unit manufacturing exempted goods:
The Tribunal supported the appellant's eligibility for credit on services for the EHTP unit manufacturing exempted goods exported outside India. It emphasized that the intention is to export goods, not taxes, hence credit should not be denied on exempted goods meant for export. This decision aligned with the government's objective of promoting exports.

Denial of credit on specific services like catering, C&F services, freight on export, travel expenses, and vehicle maintenance expenses:
The Tribunal rejected the denial of credit on specific services like catering, C&F services, freight on export, travel expenses, and vehicle maintenance expenses. It highlighted that the definition of 'input services' during the period in question was broad, encompassing services related to manufacturing final products without exclusions. Citing precedents like Bharat Heavy Electricals Ltd. case, the Tribunal upheld the appellant's eligibility for credit on these services, emphasizing the absence of restrictions in the definition.

In conclusion, the Tribunal set aside the demand for duty, interest, and penalty, allowing the appeals filed by the assessee with consequential relief as per law. The judgment focused on upholding the appellant's entitlement to distribute credit of input services, rejecting denials based on technical grounds, and emphasizing the broad scope of eligible services under the relevant rules.