2017 (4) TMI 995 - AT - Service Tax

CENVAT credit - input services distribution (ISD) - duty paying documents - the documents on which the credit has been taken are not proper in terms of Rule 9 of CCR, 2004 - time limitation - Held that - Proviso to Rule 9 states that whenever there is a doubt regarding the documents on which credit has been availed the concerned AC/DC can allow the credit after being satisfied that the credit has been properly accounted - The non registration of the Head office as ISD and the distribution of the credit on documents other than bills/invoices can be considered as procedural infractions - As the appellant succeeds on merits, it is not necessary to enter into the issue of limitation - credit allowed - decided in favor of appellant.

Summary

Issues:
Denial of CENVAT credit on input services based on lack of ISD registration and validity of documents.

Analysis:
The appeal challenged the denial of CENVAT credit on input services by the appellants, who are engaged in manufacturing Lead Acid Batteries and had availed credit based on inter office memos issued by the Head Office without ISD registration. The original authority confirmed the demand, interest, and penalty, which was upheld by the Commissioner (Appeals), leading to this appeal. The appellant's counsel argued that the tax paid was not disputed, disclosed in returns, and the demand was time-barred. The counsel cited judgments to support that credit cannot be denied solely due to lack of ISD registration by the Head office. Additionally, the validity of the documents for availing credit was contested, with reliance on previous cases where similar documents were considered valid. The appellant also challenged the penalty under Rule 15 of CENVAT Credit Rules, 2004, arguing it did not cover credit availed on input services during the relevant period.

The respondent reiterated the findings, emphasizing that the documents were not valid under Rule 9 of CENVAT Credit Rules, 2004, and the absence of ISD registration made the credit improper. The respondent argued that the show cause notice invoking the extended period was valid due to the irregular credit not being detected earlier. The respondent also pointed out that the limitation ground was not raised in the appeal grounds, questioning its consideration.

The Tribunal analyzed the disallowance of credit based on the validity of documents and ISD registration. Referring to precedents, the Tribunal highlighted the importance of substance over format in determining credit eligibility. The Tribunal noted that the service tax was paid, and the credit was distributed from the Head office to the manufacturing units, indicating no dispute over the services or tax payment. The Tribunal cited Rule 9's proviso allowing credit when properly accounted for, and referenced a case where credit on similar documents was deemed proper. The Tribunal concluded that procedural infractions like non-registration of the Head office as ISD and credit distribution on non-invoice documents could be considered minor, ultimately allowing the appeal on merits without delving into the limitation issue. The impugned order disallowing credit was set aside, and the appeal was allowed with consequential reliefs, if any.