2013 (12) TMI 1378 - AT - Service Tax

Proportionate distribution of service tax Input service distributor - Credit availed on exempted units excluded Held that - Proportionate distribution of service tax was not required under the Rules as applicable at the material time Following Ecof Industries (P.) Ltd. Versus Commissioner of Central Excise, Bangalore 2009 (10) TMI 171 - CESTAT, BANGALORE - the appellants are eligible for relief Order set aside and the matter remanded back to the adjudicating Commissioner for the limited purpose of re-quantification by demand Decided in favour of assessee.

Summary

Issues:
Distribution of credit by central unit, Exclusion of credits relating to exempted units, Applicability of Rule 7 of CCR, 2004, Relief sought based on Karnataka High Court judgment, Consideration of relevant decisions by Adjudicating Commissioner, Eligibility for relief based on Tribunal's decision.

Distribution of credit by central unit:
The appellants' central unit at Calcutta distributed credit, excluding credits related to exempted units. The impugned order confirmed this exclusion in para 19, stating that the credit distributed did not exceed the service tax paid and certain credits received were not distributed due to their association with units manufacturing exempted goods.

Applicability of Rule 7 of CCR, 2004:
The appellants sought relief based on the judgment of the Hon'ble High Court of Karnataka in a specific case, arguing that proportionate distribution of service tax was not required under the rules applicable at the material time. The consultant representing the appellants highlighted that this argument was not presented before the Adjudicating Commissioner for consideration.

Relief sought based on Karnataka High Court judgment:
The Tribunal noted that the order of the Tribunal in the case cited by the appellants had been upheld by the Hon'ble High Court of Karnataka and followed by other Tribunal Benches until a specific date. Consequently, the appellants were deemed eligible for relief in line with the decision in the mentioned case. Therefore, the impugned orders were set aside, and both appeals were remanded to the adjudicating Commissioner for re-quantification, considering the relief granted in the Bangalore Bench's decision.

Consideration of relevant decisions by Adjudicating Commissioner:
The Tribunal acknowledged that the decisions cited by the appellants were not presented before the Adjudicating Commissioner during the initial proceedings. However, the Tribunal found merit in the arguments based on these decisions and granted relief accordingly, setting aside the impugned orders and remanding the appeals for re-quantification.

Eligibility for relief based on Tribunal's decision:
Given the alignment of the appellants' case with the decisions of the Tribunal and the High Court of Karnataka, the Tribunal concluded that the appellants were entitled to relief as per the precedent set in the cited case. Consequently, the appeals were allowed, and the matter was remanded to the adjudicating Commissioner for further action in light of the relief granted.

This detailed analysis covers the issues involved in the judgment, including the distribution of credit, the application of Rule 7 of CCR, 2004, the relief sought based on the Karnataka High Court judgment, the consideration of relevant decisions by the Adjudicating Commissioner, and the eligibility for relief based on the Tribunal's decision.