2023 (6) TMI 1105 - AT - Central Excise

Distribution of CENVAT credit - nexus between the invoices and utilisation of input service tax credit could not be established - Rule 9(1)(g) alongwith Rule 7 of CENVAT Credit Rules, 2004 - Banking service - construction service - extended period of limitation. Whether it is a case of transfer of credit by ISD or it is a case of taking of credit on the strength of invoice not having the name of the concerned unit/recipient? HELD THAT - As per Rule 9(1), the cenvat credit can be taken by the manufacturer on the basis of certain documents like invoices, bill or challan etc. It can also be taken on the strength of invoice, bill, challan and issued by ISD (input service distributor) under Rule 4A of Service Tax Rules 1944. In this case, it is seen that while Department has claimed the Hyderabad office as head office and therefore in order to pass the credit, they should have taken ISD registration and should have also followed the statutory procedure for distribution, whereas the appellants are argues that documents like challan issued by banks are sufficient document under Rule 4A and hence on that strength that itself they can take credit. ISD can be any office, where the invoices issued under Rule 4A are received and distributed. The invoices under Rule 4A of STR provides for issuance of a specific invoice bill or challan giving certain details etc. In fact, in the case of a bank company an invoice, a bill or challan, as the case may be, also includes any document by whatever name called, whether or not serially numbered and whether or not containing address of the person receiving taxable services but it should contain other information in such documents as required under the said subrule. Whether the debit advice/invoice issued by the banks to their office in Hyderabad, can be considered as an eligible documents issued under the provisions of Rule 4A or otherwise? - HELD THAT - It is a case where there is no need for any ISD distribution and the only issue which needs to be decided is whether the invoice/advise raised by the banks are sufficient to allow the Gumpam unit to take the credit - It is undisputed fact that such imports have taken place with reference to Gumpum unit only and the input service in issue is an eligible input service. It is also noted that in the case of provision of services by Bank etc, much latitude has been given regarding nature of documents which could be issued under Rule 4A. There is no allegation in the show cause notice that the raw materials were not received in the Gumpam unit. Therefore, nonmentioning of the name and address of the unit receiving such services despite having actually received and also have incurred expenses towards that, can not result in complete denial of credit. Thus, the challans/debit advice issued by bank, if correlatable to Bill of Entries in the name of Gumpum Unit, indicating payment of service tax, has to be as a treated as valid document for the purpose of taking credit under Rule 9(1) by the appellant. In the case of LAXMI ORGANIC INDUSTRIES LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIGAD 2017 (5) TMI 665 - CESTAT MUMBAI , the Tribunal held that credit cannot be denied on the ground that either the invoice is not in appellant s name but in the name of their Head office or that the Head office is not registered under the ISD. The provisions under CCR provides for clearance of input or capital goods as such by reversing the credit taken originally on such inputs or capital goods. It is admitted that this provision has not been adhered to in the instant case, as the inputs were being cleared on stock transfer basis on the payment of central excise duty even when there was no manufacture involved, which is different then the mechanism provided for clearance of inputs as such, on which the credit has been take under. Banking service - HELD THAT - Here admittedly there has been stock transfer of such inputs on which they had taken credit initially and even though, they have paid central excise duty on the same, it cannot be considered as a method for reversing the credit for clearance of input as such. And to that extent, the inputs not used at Gumpum Unit cannot be considered to have been used in their factory - The co-relation of the invoice/challans issued by the bank and the Bill of Entries under which the inputs have been received by Gumpam unit needs to be done in detail as per the Appellants provide all the relevant documents to Original Authority. Thereafter, to the extent to which such inputs, not having been consumed in the Gumpam unit, the credit has to be denied on account of their having not been used in relation to the manufacture of the final product. The remaining credit is to be allowed. The interest and penalty applicable under section 15(2) of CCR 2004 read with Section 11AC (1)(c) of Central Excise Act 1944 would also be applicable on such ineligible credit. Construction Service - HELD THAT - It is clearly not admissible and so to that extent the amount of Rs. 1,05,424/- out of total demand of Rs. 13,01,140/- as confirmed by the Original Authority and also upheld by Commissioner (Appeals) needs to be upheld. Thus, the extent of demand on account of credit of ineligible service i.e. construction service, the Order of Original Authority and Commissioner (Appeals) is upheld and for remaining amount of demand, the order is set aside for the purpose of redetermination of admissible credit. Extended period of limitation - HELD THAT - Since the admitted fact is that they have not correctly followed the procedure for clearing inputs on which credit was taken, as also the fact that appellant have not come out clean before the Department with all the relevant facts before the audit, it is not found, that sufficient grounds have been brought on record by appellants so to interfere with the observations of Commissioner(Appeals) on this issue. Therefore, the extended period has been rightly invoked in the facts of the case. The appeal is partly allowed by way of remand for redetermination of amount of eligible credit out of total demand and for recovery of remaining amount, levy of interest applicable and imposition of penalty with reference to such ineligible credit, so determined.

Summary

Issues Involved:
1. Availment of "input service" tax credit based on invoices and bank payment vouchers.
2. Distribution of expenses by head office and the nexus with the Gumpam unit.
3. Eligibility of credit for construction services.
4. Invocation of the extended period for issuing the show cause notice.

Summary:

1. Availment of "input service" tax credit based on invoices and bank payment vouchers:
The Appellant availed input service tax credit based on invoices and bank payment vouchers issued to their head office in Hyderabad. The Department argued that the head office should have distributed the credit via an ISD challan as per Rule 4A of Service Tax Rules, 1994, and Rule 7 of CENVAT Credit Rules, 2004. The Original Adjudicating Authority upheld this view, stating that the appellant did not follow the correct procedure for distributing input service tax credit.

2. Distribution of expenses by head office and the nexus with the Gumpam unit:
The Department observed that the expenses incurred by the head office were passed entirely to the Gumpam unit, without proper distribution. The Commissioner (Appeals) upheld this observation, stating that the credit should be distributed on a pro-rata basis among the units. The Appellant contended that the Hyderabad office was not a head office but merely a liaison office for making payments, and the credit was correctly availed by the Gumpam unit.

3. Eligibility of credit for construction services:
The Original Adjudicating Authority and the Commissioner (Appeals) both held that the credit availed for construction services provided by M/s M. Varalakshmi was ineligible. The Appellant did not contest this finding and agreed to pay the ineligible credit amount of Rs. 1,05,424/-.

4. Invocation of the extended period for issuing the show cause notice:
The Appellant argued that the availment of credit was duly reflected in their returns, and therefore, the extended period for issuing the show cause notice should not apply. The Commissioner (Appeals) and the Tribunal found that the Appellant had not followed the correct procedure for clearing inputs and had not disclosed all relevant facts to the Department, justifying the invocation of the extended period.

Conclusion:
The Tribunal held that the Hyderabad office was not required to act as an ISD, and the Gumpam unit could take credit based on the bank's debit advice/invoices if they were correlatable to the Bill of Entries for inputs received at the Gumpam unit. However, the credit for inputs not used at the Gumpam unit was not admissible. The case was remanded back to the Original Authority for redetermination of eligible credit. The appeal was partly allowed for redetermination, and the extended period for issuing the show cause notice was upheld.