2016 (11) TMI 477 - AT - Central Excise

CENVAT Credit - input service distributor - cross unit utilization - security service - general insurance service - consultancy engineering services - input services received at Sikkim unit, having no nexus with manufacturing at their Dadra unit, therefore, not eligible to CENVAT Credit being fall outside the scope of definition of input service prescribed at Rule 2(l) of CENVAT Credit Rules 2004 - Held that - the Appellants on the basis of invoices issued under Rule 4A of Service Tax Rules, 1994 by their head office registered as an input service distributor availed CENVAT Credit at their manufacturing facility at Dadra unit. It is also not in dispute that the entire credit relates to the input services viz. security service, general insurance service, consultancy engineering services received and utilized at their Sikkim unit. It is the contention of the Appellant that as per the existing provisions during the relevant period, there was no necessity that the input services be received and utilized in the factory of the manufacturer where CENVAT Credit was availed. Reliance placed on the decision of the case of CCE Bangalore-I Vs ECOF Industries Pvt. Ltd 2011 2011 (2) TMI 1130 - KARNATAKA HIGH COURT where it was held that The law mandates that the manufacturer who wants to avail the benefit of this service tax if he has more than one unit he should also get registered himself as a service provider and then, he would be able to collect all the input service tax paid in all its units and accumulate them at its head office and distribute the said credit to its various units. Merely because the input service tax is paid at a particular unit and the benefit is sought to be availed at another unit, the same is not prohibited under law. CENVAT credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availment of CENVAT Credit based on invoices from head office
- Nexus requirement for availing CENVAT Credit on input services
- Bar on limitation for issuing demand notice

Availment of CENVAT Credit based on invoices from head office:
The appeal was filed against an order passed by the Commissioner (Appeals) regarding the denial of CENVAT Credit amounting to ?1,39,055/- availed by the Appellants on invoices issued by their head office. The Appellant argued that compliance was met before availing the credit, as per Rule 7 of CENVAT Credit Rules, 2004. The Appellant relied on a judgment by the Hon'ble Karnataka High Court in a similar case. The Revenue representative reiterated the findings, emphasizing the necessity of nexus between input services and the manufacturing unit. The Tribunal noted that the Appellants availed credit at their Dadra unit based on invoices from their Sikkim unit but found no legal impediment to this practice, citing the Karnataka High Court judgment and the limitations under Rule 7 for credit distribution by an input service distributor.

Nexus requirement for availing CENVAT Credit on input services:
The dispute revolved around whether the input services availed at the Sikkim unit, with no direct nexus to the Dadra manufacturing unit, were eligible for CENVAT Credit. The Appellant contended that during the relevant period, there was no requirement for input services to be utilized at the same location where credit was availed. The Tribunal referenced the Karnataka High Court judgment, clarifying that as long as the manufacturer registers as an input service distributor, credit distribution is permissible under Rule 7, subject to specific limitations. The Tribunal found the circumstances akin to the Karnataka High Court case and upheld the Appellant's right to claim CENVAT Credit.

Bar on limitation for issuing demand notice:
The Appellant argued that the demand notice issued in 2011 for credit availed in September 2006 was time-barred, as all relevant information was disclosed in the monthly return. The Tribunal did not find merit in this argument and focused on the eligibility of the Appellant to claim credit based on the Karnataka High Court judgment and relevant legal provisions. The appeal was allowed, setting aside the impugned order and granting consequential relief as per law.

In conclusion, the Tribunal's decision favored the Appellant, allowing the appeal and emphasizing the legality of availing CENVAT Credit based on invoices from a different unit within the same organization, as long as the requirements under Rule 7 were met. The judgment highlighted the importance of compliance with statutory provisions and relevant case law in determining the admissibility of CENVAT Credit.