2017 (9) TMI 630 - AT - Service Tax

CENVAT credit - service tax paid on certain services received in the registered office of the company that are common to more than one manufacturing unit on the ground of non-distribution of the said credit to different units under the provisions of Rule 7 of CENVAT Credit Rules, 2004 by not obtaining ISD registration - Held that - the issue in the present case is covered by the decisions of the Tribunal in the case of Doshion Ltd. vs. CCE, Ahmedabad 2012 (10) TMI 952 - CESTAT AHMEDABAD , where it was held that The omission to take registration as an Input Service Distributor can at best be considered as procedural irregularity. There is no irregularity in taking the credit by the appellant because the said input services are related to all the units and it is not possible to segregate the said services in relation to a particular unit - also, distribution of credit by the ISD as per Rule 7 came to be added by way of Clause (d) to Rule 7 much after the period in dispute. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of CENVAT credit for service tax paid on common services, Non-distribution of credit under Rule 7 of CENVAT Credit Rules, 2004, Revisionary powers under Section 84 of the Finance Act, 1994.

Analysis:
The appeal challenged the order disallowing CENVAT credit of ?6,66,356 along with interest and penalty, passed by the Commissioner under revisionary jurisdiction. The appellant, engaged in manufacturing vehicle accessories, availed credit on services not exclusively related to one unit, without being registered as an Input Service Distributor (ISD). The dispute revolved around the denial of credit for services common to multiple units due to non-distribution under Rule 7 of CENVAT Credit Rules, 2004.

The appellant argued that the impugned order misinterpreted Rule 7 and violated established legal precedents. Three key questions were raised: the mandatory distribution of tax paid on services, the consequences of non-distribution under Rule 14, and the validity of the Commissioner's revisionary powers under Section 84 of the Finance Act, 1994. The appellant contended that the Commissioner lacked jurisdiction to exercise revisionary powers, as the original show-cause notice invoked Central Excise Act provisions, not those of the Finance Act, 1994.

The AR supported the impugned order's findings. However, the Tribunal, after reviewing submissions and precedents, found in favor of the appellant. It noted that the services in question were related to all units, making segregation impossible. Referring to relevant case law, including Doshion Ltd. and National Engineering Industries Ltd., the Tribunal concluded that the credit was validly taken, especially since Rule 7's distribution requirement was added post the disputed period. Consequently, the objection to pro-rata credit distribution was deemed legally unsustainable.

Ultimately, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal with consequential relief. The decision was based on the established legal principles and precedents cited during the proceedings, providing clarity on the issue of CENVAT credit for common services across multiple manufacturing units.