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TMI Blog2011 (2) TMI 1130X X X X Extracts X X X X X X X X Extracts X X X X ..... umulate them at its head office and distribute the said credit to its various units. Merely because the input service tax is paid at a particular unit and the benefit is sought to be availed at another unit, the same is not prohibited under law - Decided in favor of the assessee - C.E.A. No. 53 of 2010 - - - Dated:- 3-2-2011 - N. Kumar and Ravi Malimath, JJ. Shri T.M. Venkata Reddy, Advocate, for the Appellant. S/Shri K. Kumareshan for B.N. Gururaj, Advocates, for the Respondent. [Judgment per : N. Kumar, J.]. This appeal is by the Revenue in respect of three different assessment orders passed by the Tribunal [2010 (17) S.T.R. 515 (Tri.-Bang.)], which restored the order of the Assessing Authority, who had upheld the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) on input services which are not used in or in relation to the manufacture of finished goods or in relation to their manufacturing unit during December, 2006, should not be demanded and recovered from them under Rule 14 of CENVAT Credit Rules, 2004 read with Section 11A of Central Excise Act, 1944 along with interest and penalty. The assessee filed a detailed statement of objections and contended by referring to Rule 7 under which an input service distributor is allowed to distribute CENVAT credit in respect of service tax paid on input service to its manufacturing units or units providing output service. Therefore they sought for dropping of the proceedings. The Assessing Authority taking note of Rule 3(1) and Rule 7 and as well as the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e confirmed the demand and interest and directed for payment of penalty of Rs. 1,00,000/- under Rule 15 of CENVAT Credit Rules, 2004. Aggrieved by the same, the assessee preferred an appeal to the tribunal. The tribunal relying on Rule 7 as well as the master circular issued by the Board held that the combined reading of Rule 7 and the clarificatory circular dated 23-8-2007 clearly shows that there are only two restrictions regarding the distribution of the credit. The said two restrictions have no application to the facts of this case. The restrictions sought to be applied in this case in limiting the distribution of the service credit tax made in respect of the Malur unit on the ground that the services were used in respect of the Cuttack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submits that there is no reason for interfering with the order passed by the tribunal, which is strictly in accordance with law. 5. In the light of the aforesaid facts and rival contentions, the question that arises for consideration is that when service tax is paid in respect of services obtained by a unit at Cuttack whether such a credit of the said service tax paid cannot be utilized by a unit at Malur belonging to the same manufacturer, namely the assessee. 6. As we are concerned only about input service, it is sufficient to extract the definition of input, input service and input service distributor, which are defined at Rule 2(k) - Input , Rule 2(l) - Input service and Rule 2(m) - Input service provider as under :- Rule 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal; 2(m) input service distributor means as office of the manufacturer or producer of final products or provider of output service, which receives invoices issued under rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider, as the case may be; 7. Rule 3(1) has been defined as under :- A manufacturer or producer of final pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... units or units providing output service, subject to the following conditions, namely :- (a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon, or (b) credit of service tax attributable to service use in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed. Therefore, only two limitations are put for the distribution of credit by an 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 exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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