2017 (5) TMI 752 - AT - Central Excise

CENVAT credit - duty paying invoices - denial on the ground that the input service credit availed on the basis of the invoice issued by their Head Office as Input Service Distributor - it is also alleged that the Head Office as ISD had distributed the service tax paid for the activities/services provided to their units other than the actual manufacturing unit of finished excisable goods - Held that - it is clear that the various input service credit as availed by the appellant are covered within the inclusive part of the definition of Input Service under Rule 2 (l) of CCR 2004 - the appellant availed on the basis of the Input Service Distributor invoices. The various input services are related to the business of the appellant company. Hence there is no reason to deny the credit - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of Cenvat Credit based on Input Service Distribution.

Analysis:
The case involved the denial of Cenvat Credit amounting to ?5,84,949 along with interest and penalties due to alleged improper distribution of input service credit by the appellant's Head Office as an Input Service Distributor. The Adjudicating Authority and the Commissioner (Appeals) upheld the denial. The appellant contended that there was no violation of Rule 7 of Cenvat Credit Rules, 2004, as the input service credit was availed based on invoices issued by the Head Office as an Input Service Distributor for various services like professional, travel agent's, security agent's, share registry, and renting of immovable property services.

The Commissioner observed that the input services were not provided to the appellant's manufacturing unit but to other units for purposes other than manufacturing activities. The relevant provisions of Rule 2 (l) and Rule 7 of Cenvat Credit Rules, 2004 were examined to determine the eligibility of the input service credit. The definition of Input Service Distributor and the manner of distribution of credit were crucial in analyzing the case.

Upon close examination, it was found that the input service credit availed by the appellant fell within the inclusive part of the definition of Input Service under Rule 2 (l) of Cenvat Credit Rules, 2004. The Tribunal cited a similar case where the appellant was allowed credit on input services distributed by the Head Office to other units. The judgment emphasized the conditions for distribution of credit by an Input Service Distributor, highlighting that the credit should not exceed the amount of service tax paid and should not be distributed to units exclusively engaged in exempted goods or services.

Based on the precedents and legal provisions, the impugned order denying the credit was set aside, and the appeal filed by the appellant was allowed. The decision was pronounced in the Open Court on 11.05.2017. The judgment provided a detailed analysis of the relevant rules and case law to establish the appellant's entitlement to the input service credit distributed by the Input Service Distributor, ultimately leading to the favorable outcome for the appellant.