2016 (9) TMI 944 - AT - Service Tax

Cenvat credit - service tax paid on services relating to insurance and handling of final products after their removal from the factory and insurance of motor vehicles and transit insurance of goods beyond the place of removal - credit was availed by the appellant on the basis of the invoices issued by their Head Office as ISD - services such as CHA, terminal handling and insurance, banking etc. have been availed for export of goods after their clearance from the factory - Held that - appellant has submitted copies of the ISD invoices on the basis of which they have availed the Cenvat credit on various services. I find that copies of these invoices were also submitted before the First Appellate Authority but no specific findings has been recorded by the Commissioner (Appeals) on this important issue. From the perusal of some of these sample invoices, I find that the credit on various services such as CHA, handling charges, insurance etc. have been availed for export of goods at the port of export. The credit for these services stand availed at the hands of the input service distributor. I find that no such proceedings is on record against the ISD. The dispute in the present proceedings has been initiated by the Revenue against the appellant for availing Cenvat credit on the basis of ISD invoices, on the allegations that the services for which such credits have been availed are not covered by the definition of input services. The proper assessee against whom such proceedings, if at all, ought to have been initiated against is the input service distributor. The proceedings for disallowing the credit would have to be set aside. - Decided in favour of appellant

Summary

Issues: Disallowance of Cenvat credit on input services; Appeal against order dated 25/2/16; Challenge of demand for reversal of Cenvat credit; Validity of Cenvat credit availed on ISD invoices; Eligibility of services for export of goods as input services.

The judgment pertains to an appeal against the order of the Commissioner (Appeals) regarding the disallowance of Cenvat credit amounting to ?3,07,964. The dispute arose as the Revenue contended that the Cenvat credit was availed on input services not qualifying under Rule 2 (l) of the Cenvat Credit Rules, 2004. The services in question included insurance and handling of final products post-factory removal, as well as insurance of motor vehicles and transit insurance of goods beyond the place of removal. The appellant voluntarily reversed a portion of the amount but contested the remaining demand based on various grounds.

The appellant argued that the Cenvat credit was obtained through invoices from their Head Office as an Input Service Distributor (ISD). They contended that any improper credit availed should be addressed with the ISD who originally availed and transferred the credit. Additionally, they relied on legal precedents to support their claim that services availed for export of goods qualify as input services, citing decisions such as Central Excise vs. Inductotherm India P. Ltd. and CCE, Jaipur II vs. J.K. Cement Works. On the other hand, the Revenue maintained that the appellant failed to provide sufficient evidence, such as export invoices, to prove that goods were exported through a merchant exporter and that the place of removal should be considered the factory gate.

Upon review, the Tribunal found that the appellant had availed Cenvat credit based on ISD invoices, and noted that no proceedings had been initiated against the ISD for availing non-qualifying credits. Citing the decision in United Phosphorus Ltd. vs. CCE, Surat II, the Tribunal emphasized that proceedings should have been directed towards the ISD rather than the appellant. As such, the Tribunal concluded that the dispute initiated by the Revenue against the appellant for availing Cenvat credit on ISD invoices should be set aside, as the proper party to address such issues would be the ISD. Consequently, the impugned order was set aside, and the appeal was allowed.

In summary, the judgment highlights the importance of addressing Cenvat credit disputes with the relevant party, in this case, the ISD, who initially availed and distributed the credits. The Tribunal's decision underscores the necessity of directing proceedings towards the appropriate entity and ensuring that the correct party is held accountable for any discrepancies in availing Cenvat credits on input services.