2017 (2) TMI 968 - AT - Service Tax

Cenvat credit - Input services - renting of immovable property for head office - Interest - Penalty - Held that - the only issue needs to be addressed is whether the appellants are eligible to avail credit at their factory, when the entire input services have been received and utilized for their business activity at their head office. I do not find any reason for not accepting the argument of ld. C.A. for the appellants that these services are necessary and having nexus with the manufacturing activity, therefore, credit availed is definitely admissible to them at their factory - Appeal allowed - decided in favor of the assessee.

Summary

Issues:
1. Admissibility of CENVAT credit for services received at the head office.
2. Eligibility to avail credit at the factory for services utilized at the head office.
3. Impact of non-registration of head office as an input service distributor on credit availing.

Issue 1: Admissibility of CENVAT credit for services received at the head office:
The appeal was filed against an order confirming a demand notice for recovery of CENVAT credit availed on services received at the head office. The appellant argued that services like renting of immovable property, printing charges, and courier charges at the head office are essential for the manufacturing business activity at the factory. The appellant contended that these services have a direct nexus with the manufacturing activity, making the credit admissible at the factory. The Commissioner (Appeals) upheld the order, leading to the present appeal.

Issue 2: Eligibility to avail credit at the factory for services utilized at the head office:
The main contention revolved around whether the appellant could avail credit at the factory for services utilized at the head office. The appellant argued that despite the services being received at the head office, they were essential for the manufacturing business activity at the factory. The Tribunal agreed with the appellant's argument, emphasizing the necessity and nexus of these services with the manufacturing activity. Additionally, the Tribunal cited a judgment of the Hon'ble High Court of Gujarat, which supported the appellant's position.

Issue 3: Impact of non-registration of head office as an input service distributor on credit availing:
The Tribunal addressed the impact of non-registration of the head office as an input service distributor on credit availing. The Revenue reiterated the findings of the Commissioner (Appeals). However, the Tribunal referred to the judgment of the Hon'ble High Court of Gujarat, which highlighted that non-registration as an input service distributor should not automatically disentitle an entity from availing CENVAT credit. The Tribunal emphasized that the irregularity in registration was procedural and did not warrant the denial of credit, especially when full records were maintained and available for verification by the Revenue.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, granting consequential relief to the appellant as per the law. The judgment emphasized the essentiality and nexus of services received at the head office with the manufacturing activity at the factory, making the CENVAT credit admissible despite the non-registration of the head office as an input service distributor.