2019 (10) TMI 10 - AT - Service Tax

CENVAT Credit - input services - tour operator service in connection with the conducting of foreign tours to their dealers - period November 2014 to February 2016 - HELD THAT - As per the facts of the case, the said services were availed as incentive for the dealers who achieved the target sale - on perusal of the facts, it is seen that the Show Cause Notice is issued against the appellant-company who is only an ISD. The decisions relied by the ld. counsel in the case of MAHINDRA MAHINDRA LTD. VERSUS COMM. OF SERVICE TAX, MUMBAI 2017 (7) TMI 167 - CESTAT MUMBAI , KANSAI NEROLAC PAINTS LTD. VERSUS COMMISSIONER OF GST, MUMBAI 2018 (5) TMI 673 - CESTAT MUMBAI and INDIAN OIL CORPORATION LTD. VERSUS COMMISSIONER OF C. EX., DELHI-II 2014 (10) TMI 729 - CESTAT NEW DELHI have discussed the said issue as to whether the demand can be raised against the ISD alleging wrong availment of credit when the credit has been availed by the unit company and the ISD has only distributed the credit - The demand raised against the appellant-company who is an ISD cannot sustain. Appeal allowed - decided in favor of appellant.

Summary

Issues: Whether the credit availed on input services in the form of tour operator service is eligible or not, and whether the demand raised against the ISD company is sustainable.

Analysis:

1. Input Service Eligibility:
The appellant, an ISD, distributed credit of service tax paid on tour operator services to their dealers as an incentive. The department contended that tour operator services do not qualify as input services, leading to a Show Cause Notice demanding recovery of wrongly availed credit, interest, and penalty. The appellant argued that the tour operator services were provided as incentives to dealers, making them eligible for credit. Reference was made to a decision in a similar case to support this argument.

2. ISD Liability:
The appellant ISD company, which distributed the credit, argued that even if the credit was wrongly availed, the demand should be made against the unit that availed the credit, not the ISD itself. The appellant cited precedents where demands were challenged on similar grounds, emphasizing that the ISD's role was limited to distributing credits and not availing them directly.

3. Contentions and Decisions:
The appellant's counsel relied on case law to support the eligibility of tour operator services as input services when provided as incentives. The department argued that the foreign tours were for personal consumption and not eligible for credit, distinguishing the case cited by the appellant. The Tribunal considered the applicability of the cited decisions regarding demands against ISDs for wrongly availed credits by unit companies, ultimately finding the demand against the ISD unsustainable.

4. Judgment:
After hearing both sides, the Tribunal concluded that the demand against the ISD company for the allegedly wrongly availed credit on tour operator services could not be sustained. Citing the precedents and the specific role of ISDs in credit distribution, the Tribunal set aside the impugned order, allowing the appeal with any consequential relief. The judgment clarified the distinction between the ISD's role in credit distribution and the liability for credit availed by unit companies, leading to the decision in favor of the appellant ISD company.