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2022 (4) TMI 71 - HC - Central ExciseInput tax credit - Tribunal overlooked the statutory provisions enacted by parliament - rewriting of the provision and recorded perverse finding is required or not - availment of CENVAT Credit on invoices/debit notes issued by Input Service Distributor ISD prior to their registration, without proper appreciation of the scheme - Service Tax Registration of Special Category of Persons Rules, 2005 without proper appreciation of the scheme - HELD THAT - The dispute involved herein is no more res integra in view of the judgment of the Hon'ble High Court of Gujarat in the case COMMISSIONER OF CENTRAL EXCISE VERSUS DASHION LTD 2016 (2) TMI 183 - GUJARAT HIGH COURT , which has been accepted by the Department in terms of the Circular dated 16.02.2018 - It was held in the case that there is nothing in the said Rules of 2005 or in the Rules of 2004 which would automatically and without any additional reasons disentitle an input service distributor from availing Cenvat credit unless and until such registration was applied and granted. The CENVAT Credit claimed by the respondent-assessee on the basis of the Invoices/Debit notes issued by the head office for the months of March, July and August 2006 prior to its registration as ISD on 21.09.2006 being procedural irregularity and the view of the Hon'ble High Court of Gujarat being accepted by the Department, input tax credit cannot be denied - substantial questions of law are answered in favour of the assessee and against the Revenue. Hence, Appeal stands dismissed.
Issues:
1. Interpretation of statutory provisions and rewriting of provisions by Tribunal. 2. Eligibility of CENVAT credit on invoices/debit notes issued by Input Service Distributor (ISD) prior to registration. Issue 1: Interpretation of statutory provisions The appeal by the Revenue under Section 35G of the Central Excise Act, 1944 challenged the order passed by the Customs, Excise & Service Tax Appellate Tribunal, South Zonal Bench, Bengaluru. The substantial questions of law considered were whether the Tribunal overlooked statutory provisions enacted by Parliament, resulting in rewriting of provisions, and whether the Tribunal was correct in holding that CENVAT credit can be availed on invoices/debit notes issued by ISD prior to their registration under the Service Tax Rules. The dispute arose when the department found that the assessee had availed and utilized CENVAT credit on input services based on invoices/debit notes issued by the head office before its registration as ISD. The Commissioner concluded that the assessee was not entitled to CENVAT credit, leading to an appeal before the CESTAT, which ruled in favor of the assessee. Issue 2: Eligibility of CENVAT credit on pre-registration invoices The Revenue argued that the respondent was not entitled to avail CENVAT credit on invoices/debit notes issued before the head office's registration as ISD, citing notification No.27/2005-ST. The Department contended that registration of ISD was mandatory for availing CENVAT credit of input services. However, the respondent's counsel relied on the judgment of the High Court of Gujarat and a Circular issued by the Ministry of Finance, emphasizing that the Rules did not automatically disentitle an ISD from availing CENVAT credit unless registration was applied and granted. The Department accepted the judgment of the High Court of Gujarat, acknowledging that substantial benefit cannot be denied due to procedural irregularity. The High Court, referring to the judgments of the High Courts of Gujarat and Madras, upheld that denial of CENVAT credit based on procedural irregularity was not justified, and input tax credit could not be denied in such cases. In conclusion, the High Court dismissed the appeal, affirming that the CENVAT credit claimed by the respondent on pre-registration invoices was a procedural irregularity and that the view of the High Court of Gujarat, accepted by the Department, supported the assessee's entitlement to the credit. The substantial questions of law were answered in favor of the assessee, leading to the dismissal of the appeal by the Revenue.
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