2016 (6) TMI 313 - AT - Central Excise

Eligibility for availment of Cenvat credit - Excise duty paid on inputs and capital goods as well as Service tax paid on Input services - Invoices addressed to appellant s head office at Chennai based - valid duty paying documents - services relatable to trading - not registered as Input Service Distributor during the period April 2011 to March 2012. Held that - it is found that this Bench of the Tribunal, in the case of Pricol Ltd. Vs CCE Coimbatore 2015 (1) TMI 350 - CESTAT CHENNAI is directly on the issue on hand wherein the Tribunal has held that procedural law deserves to be construed as directory instead of mandatory for its application. The non-registration as ISD should not deprive the appellant of substantial benefit of credit. Moreover, it is found that the appellant has taken the ISD Registration w.e.f. 18.3.2013, and since this is only a procedural lapse in law, credit cannot be denied. The other aspect with regard to trading of goods should be looked into by the adjudicating authority and for that purpose, I remand the matter back to the adjudicating authority to have a relook into the whole issue. In the event, if it is found that appellant has availed the credit which are used for trading of goods, they shall reverse the same immediately. Since the credit is held to be eligible, the consequential penalty is also set aside. - Appeal disposed of

Issues Involved:
1. Disallowance of credit on the ground of invoices addressed to the appellant's head office.
2. Eligibility of credit for excise duty paid by the head office.
3. Requirement of registration as Input Service Distributor (ISD).
4. Applicability of trading activities on credit availed.
5. Interpretation of procedural law in relation to substantial benefit of credit.

Issue 1: Disallowance of Credit on Invoices Addressed to Head Office
The appellant, engaged in manufacturing Ceramic Fibre Products, availed credit for excise duty paid on inputs and capital goods as well as service tax on input services. Disallowance of credit was based on invoices addressed to the head office, deemed invalid by lower authorities. The contention was that services related to "trading" were not considered input services. Both adjudicating and appellate authorities upheld the demand, leading to the appeals before the Tribunal.

Issue 2: Eligibility of Credit for Excise Duty Paid by Head Office
The primary issue revolved around the eligibility of credit for excise duty paid by the head office, as the appellant was not registered as an Input Service Distributor during the relevant period. The Revenue argued that the appellant engaged in trading activities, questioning the credit availed. The Tribunal analyzed case laws cited by the appellant, emphasizing the substantial link between services availed and manufacturing activities. The Tribunal, citing precedent, held that procedural law should not deprive the appellant of credit due to a delay in registration.

Issue 3: Requirement of Registration as Input Service Distributor
The appellant contended that non-registration as an ISD should not result in denial of substantial credit benefits. The Tribunal acknowledged the appellant's ISD registration post the disputed period, deeming the lack of registration during the period a procedural lapse. The matter was remanded to the adjudicating authority for further verification regarding trading activities and instructed immediate reversal of credits if used for trading goods.

Issue 4: Applicability of Trading Activities on Credit Availed
The Revenue highlighted the possibility of credit availed on invoices addressed to the head office being utilized by other units due to lack of ISD registration. The Tribunal directed a reevaluation by the adjudicating authority to determine if credits were used for trading activities. Any such credits found to be used for trading were to be reversed immediately, while eligible credits were upheld, leading to the setting aside of consequential penalties.

Issue 5: Interpretation of Procedural Law
The Tribunal emphasized that procedural law should serve justice and not deprive legitimate credit claims. It cited the need for a balance between procedural requirements and substantive rights, stressing that procedural laws should aid in the administration of justice. The Tribunal's decision underscored that procedural lapses, such as delayed registration, should not impede the rightful entitlement to credit benefits.

In conclusion, the Tribunal's judgment addressed the issues of credit disallowance, eligibility concerning excise duty, ISD registration, impact of trading activities on credit availed, and the interpretation of procedural law in the context of substantial credit benefits. The decision emphasized the importance of ensuring procedural compliance while safeguarding the substantive rights of the appellant in claiming legitimate credits.

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