2024 (7) TMI 1311 - AT - Central Excise

Denial of CENVAT Credit - ISD invoices issued to the appellant did not contain the particulars prescribed under Rule 4A of the Service Tax Rules, 1994 - appellant had availed credit by splitting the credit as service tax, education cess, secondary higher education cess and utilized the same - entitlement to avail the credit based on the ISD invoices as the appellant unit had not received the input services covered under the said invoices. Splitting the credit as service tax, education cess, secondary higher education cess and utilising the same - HELD THAT - It is found that Secondary and Higher Education Cess , has been made Cenvatable by suitably amending the Cenvat Credit Rules, 2004 vide Budgetary Notification No. 10/2007-CE (NT), whereby the credit of the education cess on excisable goods and the secondary and higher education cess on excisable goods and education cess on taxable services can be utilized, either for payment of the education cess on excisable goods or secondary and higher education cess on excisable goods or for the payment of education cess on taxable services. Hence there was no bar on service tax credit being split and utilized for paying education cess liability. Availment of credit based on such ISD invoices as the appellant unit had not received the input services covered under the said invoices - HELD THAT - The issue has been considered by the Hon'ble Karnataka High Court in the case of COMMISSIONER OF CENTRAL EXCISE, BANGALORE-I COMMISSIONERATE VERSUS ECOF INDUSTRIES (P.) LTD. 2011 (4) TMI 560 - KARNATAKA HIGH COURT wherein it was held that 'the assessee is entitled to distribute the Cenvat credit on the input services on its manufacturing unit or other units providing the output services. The view taken in the order in appeal that the distribution of credit is for the advertisement of the product, which is not at all manufactured at Malur Unit, therefore, cannot be accepted. The finding recorded by the Appellate Authority that the assessee is entitled to take credit only in the unit where the product is manufactured is therefore not the mandate of Rule 7 of the Cenvat Credit Rules.' The appellant was eligible for availing the credit and the demand for duty and imposition of penalty in the impugned order cannot be sustained. The impugned order hence merits to be set aside and is so ordered - Appeal allowed.

Summary

Issues:
1. Denial of CENVAT credit by the Adjudicating Authority.
2. Allegation of splitting and utilizing service tax credit.
3. Entitlement of the appellant to avail credit based on ISD invoices.

Analysis:

Issue 1: Denial of CENVAT credit
The appellant, a manufacturer of various goods, was alleged to have availed ineligible service tax credit distributed by an Input Service Distributor (ISD) to the tune of Rs.2,23,57,000/- during a specific period. The Adjudicating Authority confirmed the recovery of this ineligible credit along with interest and imposed a penalty under sec. 11AC of the Central Excise Act, 1944. The appellant contended that they were availing CENVAT credit based on ISD invoices provided by their corporate office, which were in compliance with the required details. The Tribunal, citing previous decisions, held that credit cannot be disallowed when the necessary details are provided in the annexure to the invoice, which is verifiable. Thus, the denial of CENVAT credit on this ground was not upheld.

Issue 2: Allegation of splitting and utilizing service tax credit
The appellant was accused of splitting the credit as service tax, education cess, and secondary higher education cess during certain months and utilizing it accordingly. The Tribunal noted that the credit of education cess on excisable goods and taxable services can be utilized for specific purposes as per Budgetary Notification No. 10/2007-CE (NT). Therefore, there was no prohibition on splitting and using service tax credit for paying education cess liability. Consequently, this allegation was not considered valid.

Issue 3: Entitlement of the appellant to avail credit based on ISD invoices
The appellant was challenged on the grounds that they were not entitled to avail credit based on ISD invoices as they had not received the input services covered in those invoices. Citing a decision of the Hon'ble Karnataka High Court, the Tribunal clarified that an entity is entitled to distribute CENVAT credit on input services to its manufacturing units or other units providing output services. As the appellant was eligible for availing the credit, the demand for duty and penalty imposed by the Adjudicating Authority could not be sustained. The impugned order was set aside, and the appellant was granted consequential relief as per the law.

In conclusion, the Tribunal ruled in favor of the appellant, allowing the appeal and disposing of the case accordingly on 26.07.2024.