2016 (12) TMI 270 - AT - Central Excise

ITC - non registration of office as input service distributor - Held that - The appellants have availed credit of service tax paid on banking and financial service and also on service on inward transportation. The issue whether the non-registration of the main unit/appellant is fatal for availing credit is no longer resintegra. The Co-operative Bench of the Tribunal in the case of M/s National Engineering Industries Ltd., 2015 (9) TMI 1076 - CESTAT NEW DELHI has held that appellant cannot be denied Cenvat Credit availed by them in the absence of registration as input service distributor by the Head Office - CENVAT credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availing input service credit without registration as an "input service distributor."
2. Denial of credit due to procedural error.
3. Legal validity of denial of credit based on non-registration.
4. Applicability of previous case laws on the issue.

Analysis:
Issue 1: The appellant was accused of availing input service credit based on documents from their unregistered head office. A show cause notice was issued, leading to confirmation of demand, interest, and penalty by the original authority and the Commissioner (Appeals). The appellant argued that the irregularity was in the sister units availing credit on head office invoices, not in distributing credit. The appellant later registered as an input service distributor.

Issue 2: The appellant contended that the denial of credit due to a procedural error was unjust, emphasizing that substantial benefit should not be denied for procedural lapses. The appellant cited previous decisions to support their argument, asserting that denial of credit in such cases was not warranted.

Issue 3: The Assistant Commissioner defended the denial of credit, stating that it was lawful as the appellant had not followed the registration requirement. However, the Tribunal noted that denial of credit solely based on non-registration was no longer a valid reason, citing precedents where denial of Cenvat Credit was not upheld due to lack of registration as an input service distributor by the head office.

Issue 4: The Tribunal analyzed the case laws referenced by both parties and concluded that the denial of credit was unsustainable. Relying on the judgments in previous cases, the Tribunal held that the appellant had correctly availed Cenvat Credit on various services. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential reliefs.

This judgment clarifies the legal position regarding the denial of credit based on non-registration as an input service distributor and emphasizes the importance of following proper procedures for availing credits.