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2018 (7) TMI 1429 - AT - Central ExciseCENVAT Credit - whether the appellant could have taken the Cenvat credit of service tax paid on the services which were also utilised by their unit number-II? Held that - An identical issue was considered by the Tribunal in the case of M/s Dynamic Cables Pvt. Ltd. V/s CGST & CE, Jaipur, 2018 (7) TMI 1336 - CESTAT NEW DELHI where reference was made to the Tribunal s decision in the case of Doshion Ltd. V/s CCE, Ahmedabad 2012 (10) TMI 952 - CESTAT AHMEDABAD , where in it was held that distribution of the credit without taking registration as input service distributer cannot be held to be as irregular - Even as per the revenue the credit was available to unit number-II, who has discharged duty in cash during the relevant period. If the credit would have been availed by unit number-II, they could have utilised the same for payment of duty on their final product instead of paying the duty through PLA - As such the entire exercise is revenue neutral thus not resulting in any loss to the Revenue. Credit cannot be denied - the demand is set aside along with setting aside of penalty - appeal allowed - decided in favor of appellant.
Issues:
1. Availment of Cenvat credit by one unit for services utilized by another unit. 2. Denial of Cenvat credit and imposition of penalties. 3. Interpretation of rules regarding distribution of credit without being registered as Input Service Distributor (ISD). 4. Application of precedents and circulars to determine substantive benefits. Analysis: 1. The appellant, engaged in manufacturing Textile Chemicals & Oil, had two units in the same industrial area, registered separately under Central Excise. A Centralized Registration of Service Tax was obtained at the head office, where Unit Number-III was located. Cenvat Credit of ?15,30,258.00 was availed by Unit Number-III based on invoices issued in the name of the head office. 2. Show Cause Notice was issued invoking longer limitation period, proposing denial of Cenvat Credit and penalties due to alleged non-distribution of credit between Unit Number-III and Unit Number-II. The appellant contended that both units belonged to the same assessee, and no loss to the exchequer occurred as the credit was admissible to Unit Number-II. 3. The Original Adjudicating Authority and Commissioner (Appeals) upheld the demand and penalties, except for a part related to denial of Cenvat credit on outward freight. The issue revolved around whether the appellant could claim Cenvat credit for services utilized by Unit Number-II, despite not being registered as an ISD. 4. Referring to the Tribunal's decision in a similar case and a Gujarat High Court ruling, it was established that denial of substantive benefits due to procedural irregularity was unwarranted. The appellant could have distributed the credit to any unit regardless of service utilization. The revenue acknowledged that Unit Number-II could have used the credit for duty payment, making the exercise revenue neutral. 5. The Tribunal found the issue settled and allowed the appeal, setting aside the demand and penalties. The judgment emphasized that denial of credit based on procedural irregularity when no loss to revenue occurred was unjustifiable. The plea of limitation was not addressed as the appeal was allowed on merit.
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