2009 (10) TMI 434 - AT - Service Tax

Cenvat Credit of Service tax- a show cause notice was issued demanding the reversal of such service tax credit, with interest and penalty was sought to be imposed on the ground that the appellant contravene the provisions of Rule 9 of Cenvat Credit Rule, 2004 as much as they have availed credit during the period 1-4-2005 to 31-5-2005 on the documents which are not addressed to the appellants but addressed to the other premises of the appellants at Bangalore, New Delhi, Adjudicating authority confirmed the demand and imposed penalties and also confirmed payment of interest. Held that- in the light of the decision of heavy Chemicals Ltd., credit allowed.

Summary

Issues involved:
Interpretation of Rule 4 of Service Tax Rules, 1994 regarding centralized billing and accounting systems for service providers. Whether the appellant can avail credit of Service tax paid as input service on invoices issued in the name of their branch offices.

Analysis:
The appeal was directed against Order-in-Appeal No. 183/2008 dated 1-10-2008, where the appellants were found to have contravened Rule 9 of Cenvat Credit Rules, 2004 by availing credit during a specific period on documents not addressed to them but to their other premises. A show cause notice was issued demanding reversal of the service tax credit, with interest and penalty. The adjudicating authority confirmed the demand, imposed penalties, and upheld the order. The appellants' appeal to the Commissioner (Appeals) was dismissed, leading to the current appeal.

The appellant argued that Rule 4 of Service Tax Rules, 1994 allows for centralized billing or accounting systems, and they had taken Service tax registration based on having centralized systems at their Manipal office. They cited precedents where credit was allowed for duty paid on goods addressed to branch offices but consumed at factory premises. The appellant contended that the confirmation of the demand was erroneous and should be set aside.

On the other hand, the SDR argued that without centralized registration, the appellant was not eligible to avail the Service tax credit, as it would be challenging to verify if branch offices also availed Cenvat credit. The SDR supported the findings of the Commissioner (Appeals).

The Tribunal analyzed the situation and found that the appellant did not have Service tax registration for the branch offices mentioned on the invoices. However, it was established that the appellant had centralized billing and accounting systems at their Manipal office, which aligned with Rule 4(2) of Service Tax Rules, 1994. The Tribunal concluded that denying the appellant Cenvat credit on Service tax paid by service providers solely based on invoices in the name of branch offices was unjustified. As the invoices were paid from the registered premises, the Tribunal applied precedents regarding Cenvat/modvat credit on Central Excise duty to support their decision.

In light of these findings, the impugned order was deemed unsustainable, and the appeal was allowed with any consequential relief granted.

*(Operative portion of the order already pronounced in open Court on conclusion of the hearing)*