2017 (2) TMI 777 - HC - Service Tax

CENVAT credit - input service distributor (ISD) - denial on account of nexus between three units - Held that - all the three units had a common management and no contrary material was placed on record by the Commissioner while holding that there was no nexus in between the three units - reliance was paced in the case of COMMISSIONER OF CENTRAL EXCISE Versus DASHION LTD 2016 (2) TMI 183 - GUJARAT HIGH COURT . It was only later on that additional condition by way of Clause-(d) of Rule 7 was added - The objection of the department therefore that the credit from one unit was utilized for the purpose of duty liability of other unit without pro rata distribution by the input service distributor therefore would not survive in view of no previous restriction of this nature flowing from Rule 7 of the Rules of 2004. The respondent has been able to prove that all the three units are one and the same, have common management and the Revenue has not been able to disprove this fact. Appeal dismissed - decided against Revenue.

Summary

Issues:
Appeal against order of Customs, Excise and Service Tax Appellate Tribunal regarding Cenvat Credit availed on services. Determination of admissibility of Cenvat Credit for multiple units under common management.

Analysis:
1. The case involved Central Excise Appeals against the order of the Tribunal related to the period from April 2006 to September 2009. The appellant, engaged in manufacturing, availed Cenvat Credit on various services. The dispute arose when the Commissioner alleged wrongful availment of credit for services rendered for the whole group instead of a specific unit.

2. The Commissioner contended that Cenvat Credit should have a direct nexus with the manufacture of final products. Despite the appellant's explanation and submission of details, the Commissioner deemed the credit inadmissible for all years, imposing interest and penalty. The Tribunal, however, allowed the appeals, emphasizing the common management of the three units.

3. The appellant challenged the Tribunal's decision, arguing that the units were independent with no nexus, and the turnover distribution indicated the Jaipur unit's dominance. The High Court found no substantial question of law, supporting the Tribunal's view of common management. It referenced a similar case and upheld the Tribunal's decision.

4. The term "input service distributor" was defined, and Rule 7 governed credit distribution. The High Court noted that the objection regarding credit utilization for other units without pro rata distribution was invalid. It affirmed the common management aspect and dismissed the appeals, citing the relevance of the precedent judgment and lack of legal issues arising from the Tribunal's decision.