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2021 (5) TMI 366 - HC - Central ExciseInput service distributor (ISD) - Void ab initio distributed credit - office or establishment of the said manufacturer or not - satisfaction of provisions of Rule 2(m) of Cenvat Credit Rules, 2004 - HELD THAT - The ILTD belongs to the assessee viz., ITC and is an integral division of the assessee. The aforesaid Division is not a separate legal entity and controls the supply chain of un-manufactured tobacco to the factories. The Company is registered as Input Service Distributor under the Cenvat Credit Rules, 2004 read with Service Tax Rules, 1994 for its Indian Leaf Tobacco Division in Guntur. The aforesaid registration enables distribution of service tax paid input credits to manufacturing activities carried on in the factories. A division bench of this court in COMMISSIONER OF C. EX., BANGALORE-I VERSUS ECOF INDUSTRIES PVT. LTD. 2011 (2) TMI 1130 - KARNATAKA HIGH COURT has held that there are only two limitations imposed under Rule 7 of the Rules, for distribution of credit by a Input Service Distributor. Firstly, it cannot exceed the amount of service tax paid and secondly, the credit of service tax attributable to service used shall not be distributed in a unit exclusively engaged in the manufacture of exempted goods or providing of exempted services. The manufacturer is therefore, required to register himself as Input Service Distributor and thereafter, is entitled to distribution of credit of such input in the manner prescribed under the law - No submission has been made before us as to how the aforesaid decision is not applicable to the case of the assessee. Since, the revenue has accepted the entitlement of the assessee to avail off the input credit for the assessment periods viz., November 2010 to July 2011 and for a period from August 2011 to December 2011, the revenue cannot be permitted to challenge its correctness. The substantial questions of law are answered against the revenue and in favor of the assessee.
Issues:
1. Availment of credit by M/s. ITC, Bangalore based on credit distributed by ILTD. 2. Recognition of ILTD as an Input Service Distributor and the validity of credit availed by M/s. ITC. 3. Compliance with Rule 2(m) of Cenvat Credit Rules, 2004 for credit distribution by ILTD and its availment by M/s. ITC. Issue 1: Availment of Credit by M/s. ITC, Bangalore: The appeal was filed by the revenue against the order passed by the Customs, Excise and Service Tax Appellate Tribunal regarding the availment of credit by M/s. ITC, Bangalore based on credit distributed by Indian Leaf Tobacco Division (ILTD). The revenue questioned the validity of this credit distribution and its subsequent availment by M/s. ITC, Bangalore. Issue 2: Recognition of ILTD as an Input Service Distributor: The department observed that ILTD, as an office of ITC Group located in Guntur, was not registered under the Central Excise Act and was not providing any output services. A show cause notice was issued to the assessee to recover the availed Cenvat credit. The Commissioner confirmed the demand, leading to an appeal by the assessee before the Tribunal, which was allowed. The appellant contended that ILTD was not eligible to be an Input Service Distributor, emphasizing Rule 2(m) of Cenvat Credit Rules, 2004. Issue 3: Compliance with Cenvat Credit Rules for Credit Distribution: The division bench highlighted that ILTD, being an integral division of ITC, was registered as an Input Service Distributor, enabling the distribution of service tax paid input credits to manufacturing activities. The bench referred to a previous decision regarding the limitations imposed on credit distribution by an Input Service Distributor. The Tribunal's decision was supported by the acceptance of the assessee's stand in previous periods, which the revenue did not challenge further. The Tribunal's order was deemed correct, and the substantial questions of law were answered against the revenue and in favor of the assessee. In conclusion, the appeal was dismissed, affirming the Tribunal's decision regarding the availment of credit by M/s. ITC, Bangalore based on credit distributed by ILTD, and recognizing ILTD as a valid Input Service Distributor in compliance with the Cenvat Credit Rules.
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