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2018 (5) TMI 777 - AT - Central ExciseCENVAT credit - input service distribution - Department was of the view that the appellant has not taken input service distributor registration and that appellant ought to have distributed the credit proportionate to the turn-over of the other units - Held that - The said issue is decided in the case of Dashion Ltd. 2016 (2) TMI 183 - GUJARAT HIGH COURT where it was held that there is nothing in the Rules of 2005 or in the Rules of 2004 which would automatically and without any additional reasons dis-entitle an input service distributor from availing Cenvat credit unless and until such registration was applied and granted. The decision in Dashion Ltd. has been accepted by the Department vide its Circular dated 16.02.2018 referred by the Ld. Counsel for the appellants. In such an event the demand cannot sustain. Appeal allowed - decided in favor of appellant.
Issues:
1. Irregular availment of Cenvat credit without Input Service Distributor (ISD) registration and proportionate credit distribution to other units. Analysis: The appellant, a manufacturer of automotive brake appliances, faced a demand alleging irregular availment of Cenvat credit without ISD registration and proportionate credit distribution to other units for services common to all its factories. The Commissioner confirmed the demands, but the appellants challenged this before the Tribunal. On behalf of the appellants, it was argued that Rule 7 of the Cenvat Credit Rules does not mandate ISD distribution proportionate to turnover during the impugned period. The non-registration as ISD was considered a procedural and curable defect, not justifying denial of Cenvat credit. The appellant cited precedents like CCE Vs. Dashion Ltd. and CCE Vs. National Engineering Industries Ltd., which were accepted by the department as per Circular No. 1063/2/2018-CX. The argument emphasized that the exercise was revenue neutral, as there was no revenue loss to the government. The department, represented by the Ld. AR, supported the findings in the impugned order, emphasizing the lack of ISD registration and proportionate credit distribution as the basis for the demand confirmation. The Tribunal, referring to the case of Dashion Ltd., observed that Rule 7 did not restrict credit utilization without pro rata distribution by the ISD, making the objection invalid. The Tribunal viewed the non-registration as a curable defect, especially when full records were maintained and available for Revenue verification. The decision in Dashion Ltd. was accepted by the department through a circular, leading the Tribunal to set aside the impugned order and allow the appeal with consequential reliefs. In conclusion, the Tribunal held that the demand could not sustain based on the precedent set by Dashion Ltd., emphasizing the procedural nature of the non-registration issue and the revenue neutrality of the appellant's actions.
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