2018 (3) TMI 603 - AT - Central Excise

CENVAT credit - input services distributor (ISD) - credit disallowed for the reason that the appellant has not obtained ISD registration - Held that - There is no whisper in the show cause notice alleging the manner of distribution of credit to be improper. The appellants have distributed the credit as per the law provided in Rule 7 as it stood during the relevant period. Since there is no allegation in the SCN as to the manner of distribution of credit as improper, it is not necessary to enter into such discussion - the disallowance of credit for the reason that appellant has not obtained ISD registration is unjustified and requires to be set aside Credit was also disallowed alleging that the invoices are raised in the address of the Bangalore and Pune office but credit has been availed at Hosur unit - Held that - The definition of input services does not state that the services have to be availed within the factory - the disallowance of credit is unjustified and requires to be set aside. CENVAT credit - duty paying documents - credit availed on the basis of debit notes, which were held as not valid documents - Held that - Department does not have a contention that the appellant has not discharged the service tax on the said services on which credit has been availed - the disallowance of credit on this ground is unjustified. CENVAT credit - duty paying documents - credit availed on the basis of photocopies - Held that - The appellant cannot avail credit on photocopies. These are not valid documents for availing credit. Further, if such practice of availing credit on photocopies of invoices is allowed, then it will lead to false claims of credit made by assessees - credit denied. CENVAT credit of ₹ 16,21,219/- denied on various input services stating that these services are not availed in relation to the activity of manufacture - Held that - According to appellant, all these services have an integral connection with the manufacture of finished products. That these services were consumed to carry out the activity of manufacture effectively and also to provide export of services / goods - it is found that the adjudicating authority has not made adequate discussion in this regard. Ld. counsel has submitted that they would be able to establish the nexus of the services with the output services / manufacturing activity, if they are given a further chance - matter on remand. Appeal allowed in part and part matter on remand.

Summary

Issues Involved:
1. Disallowance of CENVAT credit due to the absence of ISD registration.
2. Disallowance of CENVAT credit due to invoices addressed to Bangalore and Pune offices.
3. Disallowance of CENVAT credit on CHA services.
4. Disallowance of CENVAT credit availed on debit notes.
5. Disallowance of CENVAT credit availed on photocopies of invoices.
6. Disallowance of CENVAT credit on miscellaneous services not related to manufacturing.

Issue-Wise Detailed Analysis:

1. Disallowance of CENVAT Credit Due to Absence of ISD Registration:
The appellants contended that they had obtained ISD registration in 2008, contrary to the department's allegation that they had not registered as an Input Service Distributor (ISD). The Tribunal found that the show cause notice only alleged the absence of ISD registration without questioning the manner of credit distribution. The Tribunal noted that the appellants had indeed obtained ISD registration and thus, the disallowance of credit on this ground was unjustified and required to be set aside.

2. Disallowance of CENVAT Credit Due to Invoices Addressed to Bangalore and Pune Offices:
The Tribunal observed that the appellants had centralized registration incorporating their Bangalore and Pune units. Therefore, the credit availed on invoices raised at these addresses was deemed legal and proper. The Tribunal relied on relevant case laws to support this view and set aside the disallowance of credit amounting to ?1,00,55,221/-.

3. Disallowance of CENVAT Credit on CHA Services:
The department disallowed credit on CHA services, arguing that these services did not have a nexus with manufacturing activities and were consumed outside the factory. The Tribunal, however, noted that the definition of input services does not mandate that services be availed within the factory. Citing previous decisions and a Board Circular, the Tribunal found the disallowance unjustified and set it aside.

4. Disallowance of CENVAT Credit Availed on Debit Notes:
The Tribunal held that debit notes could be considered valid documents for availing credit, provided there was no dispute regarding the service tax paid and the services consumed. Since the department did not contest the service tax payment or service consumption, the Tribunal found the disallowance of credit on this ground unjustified and set it aside.

5. Disallowance of CENVAT Credit Availed on Photocopies of Invoices:
The Tribunal upheld the disallowance of credit availed on photocopies of invoices, emphasizing that photocopies are not valid documents for availing credit. Allowing credit on photocopies could lead to false claims, and thus, the appellant's claim on this ground was disallowed.

6. Disallowance of CENVAT Credit on Miscellaneous Services Not Related to Manufacturing:
The Tribunal noted that the adjudicating authority had not adequately discussed the disallowance of credit on various services like membership charges, exhibition stall construction charges, delegate fees, and brokerage. The appellant argued that these services were integral to manufacturing activities. The Tribunal remanded this issue to the adjudicating authority for further examination, allowing the appellant to establish the nexus between these services and their manufacturing activities.

Conclusion:
The Tribunal modified the impugned order, allowing credit for services availed except on photocopies of invoices. The issue concerning the nexus of certain services with manufacturing activities, amounting to ?16,21,219/-, was remanded to the adjudicating authority for further consideration. The appeal was partly allowed and partly remanded.