2018 (8) TMI 1570 - AT - Central Excise

CENVAT credit - input services - appellant having more than one unit - case of Revenue is that since the respondents have more than one unit, they ought to have taken ISD registration and distributed the credit - Held that - Undisputedly, the invoices are issued in the name of the respondent company who has availed the entire credit. The allegation raised against the respondent is that they ought to have taken ISD registration and ought to have distributed the credit pro-rata between themselves and the Uppal Unit - Rule 7 of CCR, 2004 as it stood during the relevant period uses the word may and not shall . The word shall was used only in 2016 as argued by the ld. counsel for respondent. Credit allowed - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Eligibility of input service tax credit for multiple manufacturing units.
2. Requirement of Input Service Distributor (ISD) registration for credit distribution.
3. Interpretation of Rule 7 of CCR, 2004 regarding credit distribution.

Analysis:
1. The case involved a dispute regarding the eligibility of input service tax credit for a company with multiple manufacturing units. The department alleged that the company should have taken ISD registration and distributed the credit proportionately between its units. The original authority confirmed the demand, but the Commissioner (Appeals) set it aside, leading to the department's appeal.

2. The department argued that the company, having multiple units, should have taken ISD registration and distributed the credit on a pro-rata basis as per Rule 7 of CCR, 2004. The phrase "shall be distributed" in the rule was emphasized as indicating the mandatory nature of credit distribution. The department contended that the company was only entitled to pro-rata credit and not the entire credit.

3. On the other hand, the company's counsel argued that all the invoices were addressed to the respondent unit, making them eligible for the credit without the need for ISD registration. The counsel highlighted the definition of an input service distributor and the benevolent provision under Rule 7 of CCR, enabling credit distribution to an assessee without ISD registration under certain conditions.

4. The company's counsel further pointed out that during the relevant period, Rule 7 used the word "may" and was later amended to "shall." Therefore, the department's appeal lacked legal basis. Additionally, it was noted that the Uppal Unit, also a duty-paying unit, had no revenue implications even if the Chennai Unit utilized the credit.

5. After hearing both sides, it was established that the invoices were issued in the name of the respondent company, which had availed the entire credit. The Tribunal noted that Rule 7 of CCR, 2004, during the relevant period, used the word "may" and not "shall." As the word "shall" was introduced in 2016, the department's appeal was found to lack merit. Consequently, the impugned order was upheld, and the Revenue's appeal was dismissed.