2016 (7) TMI 363 - AT - Service Tax

Cenvat Credit - Eligibility of Input services received at Head Office - ISD - Jurisdiction - The adjudicating authority confirmed the demand on the ground that appellant is not eligible to avail cenvat credit on the services; the ISD has distributed services which are not in accordance with Rule 7 of the Cenvat Credit Rules, 2004. - Held that - the question of jurisdiction as raised by the ld. Consultant is non-starter as the adjudicating authority has recorded that they are disputing only the eligibility of cenvat credit at the factory level in respect of services. There is no dispute at ISD level on availment of cenvat credit. Services on which cenvat credit sought to be demanded is eligible to be availed as cenvat credit by the appellant as well as ISD as per various case law cited by the ld.Consultant. In view of this, the finding of the adjudicating authority that appellant is not eligible to avail cenvat credit on those services is incorrect and this finding needs to be set aside. However, cenvat credit can be availed at Bhiwadi factory shall be as per formula under Rule 7(d) of the Cenvat Credit Rules, 2004. In order to arrive at correct cenvat credit that can be availed by the appellant, the matter is remanded back - Decided partly in favor of assessee.

Summary

Issues:
Denial of cenvat credit on various services at the factory level.

Analysis:
The appeal challenged the denial of cenvat credit to the appellant concerning several services at the factory level. The appellant's Head Office, registered as an Input Service Distributor (ISD), distributed cenvat credit to the Bhiwadi Unit. The lower authority contended that the credit was ineligible, leading to a show cause notice, confirmation of demand, and imposition of penalty. The appellant argued that no show cause notice was issued to the ISD, rendering the notice to the appellant incorrect. The appellant cited relevant case law to support their position on the relocation of cenvat credit and the eligibility of the denied services. The Revenue argued that the show cause notice was correctly issued to the appellant for the cenvat credit distribution.

The Tribunal found that the jurisdictional issue raised by the appellant was baseless as the dispute was solely about the eligibility of cenvat credit at the factory level, not the ISD level. After considering both sides, the Tribunal concluded that the services for which cenvat credit was denied were indeed eligible for availing cenvat credit, both by the appellant and the ISD, based on the case law presented. Therefore, the Tribunal set aside the finding that the appellant was not eligible for cenvat credit on those services. However, the Tribunal directed that the cenvat credit to be availed at the Bhiwadi factory should be calculated according to Rule 7(d) of the Cenvat Credit Rules, 2004. The matter was remanded back for the limited purpose of determining the correct cenvat credit that could be availed by the appellant under the specified rule and to inform the appellant accordingly. Consequently, the appeal was disposed of in line with the Tribunal's decision.