2022 (8) TMI 1106 - AT - Service Tax

Disallowance of credit - credit was denied on the ground that the Unit No. II being centralized registered unit has not issued ISD invoice - HELD THAT - It is established from the records that the appellant have taken credit of Rs. 1,24,129/- only. This position was made very clearly before the original authority as well as Commissioner (Appeals). It is found that surprisingly both the authorities have discarded this defence stating that it is an afterthought. It is clearly a fact on record which both the authorities should have verified which they utterly failed to do so. Moreover, right from show cause notice stage till Commissioner (Appeals) stage there is no evidence on record that the appellant have taken the cenvat credit of Rs. 20,72,909/- - the adjudicating authority and Commissioner (Appeals) denied this credit on the ground that the Unit No. II which has a centralized registration should have issued ISD invoice and in absence of ISD invoice, credit is not admissible. As regard the payment of service tax made by Unit No. II, since the said unit is centralized registered, Unit No. II is under obligation to pay the service tax on behalf of all the units. Merely because, the Unit No. II has paid the service tax, the eligibility of cenvat credit of the present appellant s unit will not adversely be affected because irrespective of any unit paying the service tax, all the units are under one single entity i.e. M/s IDMC Ltd. The appellant are entitled for the cenvat credit of Rs. 1,24,129/- and remaining amount for which appellant have otherwise not taken the credit, the demand of the same will not sustain - Appeal allowed - decided in favor of appellant

Summary

Issues: Disallowance of cenvat credit due to payment of service tax by centralized registered unit; Denial of credit for lack of ISD invoice issuance; Verification of cenvat credit availed by appellant.

Issue 1: Disallowance of cenvat credit due to payment of service tax by centralized registered unit
The case involved a situation where the appellant's company had five units, with Unit II having centralized registration for service tax payment. The appellant paid service tax on certain services under reverse charge mechanism, with invoices raised in the name of individual units but payment made by Unit II. The department alleged that the entire service tax paid by Unit II was availed as cenvat credit by Unit V, leading to a demand notice for disallowance of cenvat credit. The adjudicating authority and Commissioner (Appeals) upheld the demand, prompting the appellant to file an appeal. The appellant argued that each unit availed cenvat credit for their respective invoices, and the demand against them was incorrect. The Tribunal found that the appellant had only availed credit for Rs. 1,24,129, not the entire amount, and the authorities failed to verify this fact from the records. The Tribunal concluded that the demand was unsustainable as the appellant had correctly availed the credit for the actual amount attributable to them.

Issue 2: Denial of credit for lack of ISD invoice issuance
The appellant's credit of Rs. 1,24,129 was denied by the adjudicating authority and Commissioner (Appeals) on the grounds that Unit II, being centralized registered, should have issued an Input Service Distributor (ISD) invoice. However, since the invoices were in the name of the appellant unit itself, the Tribunal held that there was no requirement for an ISD invoice. The Tribunal emphasized that the necessity of an ISD invoice arises when the service provider's invoice is in the name of the Head Office, which was not the case here. Therefore, the appellant was deemed to have correctly availed the credit without the need for an ISD invoice.

Issue 3: Verification of cenvat credit availed by appellant
The Tribunal scrutinized the documents submitted by the appellant, which clearly demonstrated that the service tax of Rs. 20,72,909 was paid in respect of all five units, with only Rs. 1,24,129 attributed to the appellant. Despite this evidence, both lower authorities failed to acknowledge this fact and dismissed the appellant's defense as an afterthought. The Tribunal criticized the authorities for not verifying the records and emphasized that there was no evidence to support the claim that the appellant availed the full cenvat credit amount. Consequently, the Tribunal ruled in favor of the appellant, allowing the credit of Rs. 1,24,129 and setting aside the demand for the remaining amount, along with associated interest and penalty.