2018 (2) TMI 381 - AT - Central Excise

CENVAT credit - input service distributor - it was alleged that M/s. ITC LTD are neither manufacturers of excisable goods nor service providers in terms of the CEA 1944, and the FA 1994, respectively, and therefore it appeared that they are not entitled to distribute input services credit as an input service distributor - Held that - similar issue decided in appellant own case Commissioner of Central Tax, Bangalore Versus M/s. ITC Ltd. 2017 (9) TMI 942 - CESTAT BANGALORE , where it was held that only two limitations are put for the distribution of credit by an input service distributor. Firstly, it cannot exceed the amount of service tax paid and secondly, the credit of service tax attributable to service used shall not be distributed in a unit exclusively engaged in the manufacture of exempted goods or providing of exempted services. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
- Early hearing application by Revenue due to significant revenue involved
- Admissibility of cenvat credit on input services distributed by Input Service Distributor (M/s. ILTD)
- Appeal against Commissioner's order confirming demand, interest, and penalty

Analysis:
1. Early Hearing Application: The Revenue filed an application for early hearing due to the substantial revenue involved. The Tribunal allowed the early hearing application considering the narrow compass of the issue and proceeded to decide the appeal on merit with the consent of both parties.

2. Admissibility of Cenvat Credit: The appeal challenged the impugned order confirming demand, interest, and penalty imposed by the Commissioner. The case involved the availing of cenvat credit on input services passed on by M/s. ILTD, an Input Service Distributor. The Departmental audit revealed that M/s. ILTD, a division of the ITC Group, was not eligible to distribute input service credit as they were not engaged in manufacturing excisable goods or providing taxable services. The Tribunal noted that the law mandates specific conditions for distributing service tax credit, emphasizing that credit attributable to services used in units exclusively engaged in manufacturing exempted goods cannot be distributed.

3. Judicial Precedents: The appellant cited judicial precedents in their favor, including a Division Bench order and a High Court judgment, supporting their entitlement to cenvat credit of service tax. The Tribunal acknowledged the appellant's arguments and previous favorable decisions in similar cases, ultimately leading to the setting aside of the impugned order in favor of the appellant.

4. Contentions and Decision: The appellant contended that the impugned order was unsustainable in law as it did not consider relevant facts, legal provisions, and precedents. The Department defended the order, emphasizing the independence of M/s. ILTD from manufacturing duties and the lack of nexus between the input services and the final product. After evaluating the submissions and legal arguments, the Tribunal concluded that the impugned order was not legally sound. Consequently, the Tribunal allowed the appeal of the appellant, setting aside the Commissioner's order with possible consequential relief.

In conclusion, the Tribunal's decision favored the appellant by ruling in their favor regarding the admissibility of cenvat credit on input services distributed by M/s. ILTD, highlighting the importance of legal provisions and precedents in such cases.