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2017 (7) TMI 167 - AT - Service TaxCENVAT credit - input service distributor - The case of the department is that the total credit was distributed to all the registered units whereas the Haridwar unit is exempted from payment of excise duty. Therefore, the credit attributed to the Haridwar unit is not admissible - Held that - the input service distributors have not taken any credit whereas they have already distributed the input service credit. The credit was taken by various manufacturing units. Therefore, rule 14 can be made applicable only on the person who avails the cenvat credit wrongly or utilised the same. Therefore the appellant being an input service distributor cannot be issued any SCN - Board vide F. No.137/68/2013-STd dated 10.03.2014 wherein it was clarified that recovery under Rule 14 can be only be from the manufacturer or service provider and there is no provision for issuing a show-cause notice to input service distributor - the demand raised on the appellant being an input service distributor is not sustainable in law - appeal allowed - decided in favor of appellant.
Issues:
- Admissibility of credit attributed to a unit exempted from excise duty - Recovery of wrongly taken or utilised CENVAT credit by an input service distributor - Applicability of Rule 14 of Cenvat Credit Rules Analysis: 1. The case involved the appellant, a head office of various manufacturing units, distributing input services to different factories. The department contended that the credit attributed to the unit exempted from excise duty was inadmissible, leading to a demand under Rule 15 from the appellant, who acted as an input service distributor. 2. The appellant, represented by Shri L. Badrinarayan, argued that they were solely an input service distributor under Rule 7 of Cenvat Credit Rules, not availing credit or discharging excise duty. Citing precedents like Godrej & Boyce Mfg. Co. Ltd. and Indian Oil Corporation Ltd., the appellant emphasized that recovery of wrongly availed credit should be from the manufacturer or service provider, not the input service distributor. 3. The respondent, represented by Shri D. Nagvenkar, reiterated the findings of the impugned order, supporting the demand raised against the appellant. 4. The Tribunal carefully considered both sides' submissions and examined the nature of the appellant's role as an input service distributor. 5. Rule 14 of Cenvat Credit Rules was crucial in determining the recovery of wrongly taken or utilised CENVAT credit. The rule specifies that recovery should be from the party that wrongly availed or utilized the credit. In this case, the input service distributor had not taken any credit themselves but had distributed it to manufacturing units, making Rule 14 inapplicable to the distributor. 6. The Tribunal referred to a Board clarification stating that recovery under Rule 14 should only be from the manufacturer or service provider, not the input service distributor. This position was reinforced by a decision in Indian Oil Corporation Ltd., where it was held that recovery of wrongly availed credit cannot be raised against the input service distributor under Rule 14. 7. Based on the above analysis and legal interpretations, the Tribunal concluded that the demand on the appellant, acting as an input service distributor, was not legally sustainable. Therefore, the impugned order was set aside, and the appeals were allowed, with cross objections disposed of accordingly.
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