2010 (3) TMI 479 - AT - Service Tax

Cenvat Credit - the appellant s main unit in Mumbai has distributed the service tax credit to the Cuddalore Unit which has been disallowed by the authorities below on the ground that the credit does not relate to the Cuddalore Unit. Held that - in the light of the decision of ECOF Industries (P.) Ltd. v. CCE 2010 -TMI - 75868 - CESTAT, BANGALORE, assessee was entitled to credit.

Summary

Issues:
1. Disallowance of service tax credit distributed to Cuddalore Unit.
2. Interpretation of rules on credit distribution.
3. Pre-deposit requirement.

Analysis:
1. The issue in question revolved around the disallowance of service tax credit distributed to the Cuddalore Unit by the main unit in Mumbai. The appellant argued that a similar case was decided in their favor by the Bangalore Bench of the Tribunal, citing the case of ECOF Industries (P.) Ltd. v. CCE [2009] 23 STT 381 (Bang. - CESTAT). The appellant sought a similar decision in the present case.

2. The learned DR supported the impugned order, contending that the credit distributed to the Cuddalore Unit was not related to the services utilized by that unit. However, the Tribunal, after hearing both sides, referred to the case of ECOF Industries (P.) Ltd. and highlighted the restrictions on credit distribution as per rule 7 and a clarificatory circular dated 23-8-2007. The Tribunal emphasized that the only restrictions were that the credit should not exceed the amount of service tax paid and should not be attributable to services used in the manufacture of exempted goods or providing exempted services. Any other restrictions, such as limiting distribution based on the unit where services were used, were not supported by the rules. The Tribunal concluded that the appellants were entitled to the credit based on the interpretation of the rules and the precedent set by the earlier case.

3. In light of the above analysis, the Tribunal found in favor of the appellants, waiving the pre-deposit requirement, setting aside the impugned order, and allowing the appeal. The decision was based on the interpretation of the rules governing service tax credit distribution and the lack of specific restrictions that would justify disallowing the credit in the present case.