2017 (5) TMI 889 - AT - Service Tax

CENVAT credit - Intellectual Property Rights Service - Information Technology Software Service - reverse charge mechanism - it is alleged that the appellant should have distributed the service tax credit to the various units situated across the country and should not have availed CENVAT credit only at Pune - Held that - the services on which CENVAT credit has been availed are being used for providing output services is not in dispute. If at all Pune unit of the appellant distributes this credit to various other units on pro-rata basis CENVAT credit was available to the other units also and it is also not in dispute that during the period the other units were also discharging service tax liability in cash also. Therefore, the entire exercise would have been revenue neutral - rejecting the claim of CENVAT credit of the appellant is unsustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility to availment of CENVAT credit of service tax paid under reverse charge mechanism for 'Intellectual Property Rights Service' and 'Information Technology Software Service'.
2. Dispute regarding distribution of service tax credit to various units across the country.

Analysis:
Issue 1: The primary issue in this case revolves around the eligibility of the appellant to avail CENVAT credit for service tax paid under the reverse charge mechanism for 'Intellectual Property Rights Service' and 'Information Technology Software Service' between October 2009 to March 2014. The appellant contended that they discharged the service tax liability under reverse charge mechanism and availed CENVAT credit for services received from the parent company. The dispute arose from the Revenue's claim that the credit should have been distributed to various units across the country, not just availed at Pune.

Issue 1 Analysis: The Tribunal found the impugned order unsustainable for multiple reasons. Firstly, it noted that the Pune unit was also providing dutiable services and discharging service tax liability during the relevant period. The Revenue's argument that the credit should have been distributed on a pro-rata basis was deemed unacceptable as specific rules for such distribution were only framed after 2012. Secondly, since there was no dispute regarding the discharge of service tax on the rendered services, the Tribunal concluded that there was no valid reason to reject the appellant's claim for CENVAT credit.

Issue 2: The secondary issue pertained to the distribution of service tax credit to various units across the country. The Tribunal observed that if the Pune unit had distributed the credit to other units on a pro-rata basis, those units would have also been eligible for CENVAT credit. It was noted that during the relevant period, the other units were also discharging service tax liability in cash, making the exercise revenue neutral. Consequently, the Tribunal held that rejecting the appellant's claim for CENVAT credit was unsustainable and set aside the impugned order, allowing the appeal.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, emphasizing the appellant's eligibility to avail CENVAT credit for the service tax paid under the reverse charge mechanism for the specified services.