2018 (12) TMI 1238 - AT - Central Excise

CENVAT Credit - input service distribution - sub-rule (d) of Rule 7 of Cenvat Credit Rule 2004 - Held that - Since it is an undisputed fact that the appellant s head office is situated at Delhi and their factory at Bhiwadi and that head office is designated as Input Service Distributor (ISD) also there is no dispute on availment of cenvat credit at ISD level it is observed that the services on which cenvat credit is denied are covered by various decisions. The amount of cenvat credit as has been denied by the adjudicating authority merely for want of documents is not sustainable in view of the settled proposition of issue - appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to order of Deputy Commissioner regarding cenvat credit availed by the appellant.

Analysis:
The appellant, engaged in manufacturing aluminium alloy extruded products, challenged the order of the Deputy Commissioner regarding the cenvat credit of Service Tax. The Department observed that the appellant's head office in Delhi was issuing invoices for distribution of credit of service tax paid on various services, including those used for providing output services. A show cause notice was issued proposing recovery of wrongly availed cenvat credit amounting to ?77,61,280 during December 2012 to September 2013. The Principal Commissioner confirmed the recoverable credit to be ?18,22,207, allowing the rest. The appellant appealed to the Tribunal, claiming correct and legal availing of input service credit.

The appellant argued that the demand should be set aside as they correctly availed input service credit. They contended that the service tax availed by the Bhiwadi Unit should be distributed only among the units that received the services. The appellant proposed bifurcation of the credit amount into two segments: credit exclusively used by Bhiwadi Unit for manufacturing final products and credit commonly used by Bhiwadi Unit and other units of the appellant. The appellant sought dismissal of the demand and allowance of the appeal.

The Department countered the appellant's arguments, stating that the adjudicating authority meticulously examined all services and credit distribution before confirming the recoverable amount at ?18,22,207. The Department justified the order, seeking dismissal of the appeal. After hearing both parties and reviewing the record, the Tribunal observed that while the Principal Commissioner dropped the major demand, credit to specific services was denied based on Rule 3 and Rule 7 of the Cenvat Credit Rules.

The Tribunal noted that the denied credits were covered by various decisions and precedents. Given that the appellant's head office was the Input Service Distributor (ISD) and there was no dispute on cenvat credit availment at the ISD level, the Tribunal found the denial of credit for specific services not sustainable. Citing settled propositions and previous decisions in favor of the appellants, the Tribunal set aside the order under challenge and allowed the appeal.