2015 (12) TMI 750 - AT - Service Tax

Denial of CENVAT Credit - whether the ISD may distribute the CENVAT Credit to any other units equally to all the units, in any proportion to all the units or proportionate to the input service consumed by the unit - Held that - Commissioner (Appeals), following the decision of the Tribunal in the case of ECOF Industries Pvt.Ltd. Vs CCE Bangalore - 2009 (10) TMI 171 - CESTAT, BANGALORE decided the issue in favour of the Respondent. It is seen that the Revenue has challenged the decision of the Tribunal before Hon ble High Court, which was rejected - No reason to interfere the order of the Commissioner (Appeals). - Decided against Revenue.

Summary

Issues involved: Interpretation of rules regarding distribution of CENVAT Credit by Input Service Distributor (ISD).

Analysis:
The issue in this case revolves around the distribution of CENVAT Credit by the ISD to other units. The key question is whether the ISD can distribute the credit equally to all units, in any proportion, or proportionate to the input service consumed by each unit. The Revenue argues that the Respondent availed CENVAT Credit on services not utilized by their unit. The Commissioner (Appeals) based their decision on a previous Tribunal case and ruled in favor of the Respondent.

The Commissioner (Appeals) highlighted that Rule 7 and a clarificatory Circular indicate only two restrictions on credit distribution: not exceeding the Service Tax paid amount and not being attributable to services used in manufacturing exempted goods or services. Any additional restrictions imposed by the Department, such as limiting credit distribution based on unit usage, were deemed unjustified as they were not specified in the rules. The provision for ISD in the Service Tax Rules and Central Excise Rules allows for availing and distributing CENVAT Credit on various services, even if they are utilized by units at different locations. The absence of a specific method for credit distribution by ISD in the rules further supports the decision in favor of the Respondent.

Moreover, the Commissioner (Appeals) referenced a similar case where the issue was decided in favor of the assessee, and the Department's appeal was rejected by the High Court. The Commissioner found no grounds to interfere with the order and consequently rejected the appeal filed by the Revenue. The judgment emphasizes adherence to the existing rules and regulations governing the distribution of CENVAT Credit by ISD, highlighting the importance of clarity and consistency in applying such provisions to avoid ambiguity and ensure fairness in tax matters.