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TMI Blog2013 (7) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... t of any ISD registration number to be mentioned in a transfer challan. What the sub-rule requires, inter alia, is the mention of "registration number" i.e. Central Excise registration number or Service Tax registration number - The admissibility of the credits to the three manufacturing units will be subject to the conditions and limitations prescribed under Rule 12A – Appeal allowed by way of remand with a request to the Commissioner to undertake de novo adjudication of the dispute in accordance with law and the principles of natural justice - Adjudicating authority should proceed on the premise that Rule 12A of the CCR, 2004 is applicable to the appellant – Decided in favor of Assessee. - E/2588/2012 - 25055/2013 - Dated:- 4-2-2013 - Mr. P.G. Chacko and Mr. B.S.V. Murthy, JJ. For the Appellant: Shri N. Anand, K.S. Naveen Kumar, Advocates For the Respondent: Shri Ganesh Havannur, Additional Commissioner (AR) JUDGEMENT Per: P.G. Chacko The stay application filed by the appellant seeks waiver of pre-deposit and stay of recovery in respect of the adjudged dues. On a perusal of the records and hearing both sides, we have found a case fit for remand to the adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereby attracting penalty under Section 77 of the Finance Act. (f) The CENVAT credits so distributed by the corporate office and taken and utilized by the manufacturing units are liable to be recovered from the respective units with interest thereon inasmuch as the corporate office did not have ISD registration with the department and the challans issued by it without such registration are not valid documents for the purpose of availment of CENVAT credit. (g) The corporate office and all the manufacturing units are liable to be penalized. 3. The appellant contested the above allegations in their reply to the show-cause notice. They contended that their corporate office was not distributing CENVAT credit but only transferring the credit of Rs.2,24,70,573/- to its own manufacturing units under Rule 12A(4) of the CENVAT Credit Rules, 2004. The corporate office and the manufacturing and service-providing units were, admittedly, part of a Large Taxpayer Unit. The payment of service tax by the corporate office and the Electronic City unit on management consultancy service imported from abroad was not in dispute. There was no allegation in the show-cause notice that the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate office at UB City Bangalore and the manufacturing unit at Electronic City, Bangalore received input service (management consultancy service) from abroad and paid duty thereon under reverse charge mechanism' in terms of Section 66A of the Finance Act, 1994. The service tax so paid from January 2010 to November 2010 is to the tune of Rs.5,62,86,663/-, out of which Rs.1,63,77,285/-, Rs.36,03,763/- and Rs.24,89,525/- were transferred as CENVAT credit to the manufacturing units at Bangalore, Ahmedabad and Pune respectively in the ratio of 60:25:15 based on these units' turnover of excisable products. The total amount so transferred to the three manufacturing units is Rs.2,24,70,573/-. This transfer of CENVAT credit was effected through issue of transfer challans containing the necessary particulars. The three manufacturing units took the respective credits on the strength of these challans. The entire exercise is in accordance with sub-rule (4) of Rule 12A of the CCR, 2004. (ii) The appellant-company having been recognized as a LTU, the provisions of Rule 12A are squarely applicable to them and therefore the view taken to the contra by the adjudicating authority is unsustainab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the show-cause notice itself. (vii) At best, non-registration as ISD was only a procedural lapse which per se would not be a ground for denial of CENVAT credit to the appellant. As it is not the case of the Revenue that the appellant did something with intent to evade payment of duty or service tax or with intent to avail undue benefit, the penalties imposed on them are liable to be set aside. (viii) In any case, the corporate office of the appellant obtained ISD registration in December 2010 and, therefore, for the ends of justice, the transfer challans issued by it and the CENVAT credits taken by the manufacturing units on the strength of such documents should be deemed to be valid. (ix) The taking of credit of service tax prior to its payment happened due to an inadvertent clerical mistake only and the same might not survive as a violation of law beyond the date of payment of the service tax. (x) There are ever so many decisions of this Tribunal granting relief to manufacturers of final products to whom MODVAT/CENVAT credits were denied by the department on the ground that valid documents were not used for taking such credits vide Commissioner vs. Stelko Str ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, the learned Commissioner ought to have, at the outset, determined whether the corporate office of the company was transferring the credit to the three manufacturing units or whether it was distributing the credit to them inasmuch as there is an intelligible difference between the two. An ISD an office of the manufacturer of final products or provider of output service receives invoices issued [under Rule 4A (1) of the Service Tax Rules, 1994] by input service providers, and issues invoices [under Rule 4A (2) of the Service Tax Rules, 1994] for the purpose of distributing the credit of service tax paid on the input services, to such manufacturer of final products or provider of output service. The ISD receives and distributes service tax credit. In the case of a LTU, any of its members viz. manufacturers of final products and/or providers of output services receives input services under cover of invoices issued by the providers of such input services and transfers CENVAT credit of the service tax paid on such input services, wholly or partly, to other members of the LTU, under cover of transfer challans. In the ISD regime, the manufacturer of final products or the provider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the same LTU. During the period of dispute, all members of the LTU were having the requisite registration with the department. The corporate office of the company had service tax registration for providing services such as management, maintenance or repair service, business auxiliary service, etc. All the manufacturing units had Central Excise registration. Of these units, the one at Bangalore (Electronic City) and the one at Pune (Ranjangaon Industrial Area) had Service Tax registration as well. Other undisputed or indisputable facts are that the corporate office at UB City, Bangalore and the manufacturing unit at Electronic City, Bangalore paid service tax to the extent of Rs.5,62,86,663/- under the reverse charge mechanism in terms of Section 66A of Finance Act, 1994 in respect of management consultancy service received from abroad, that about 60% of this amount was earmarked for use by a trading unit of the appellant, that the balance amount of Rs.2,24,70,573/- was transferred by the corporate office to the three manufacturing units at Bangalore (Electronic City), Pune (Ranjangaon Industrial Area) and Ahmedabad under cover of transfer challans, that the allocations to the u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of a large tax payer". To our mind, the provisions governing ISDs are inconsistent with the provisions of Rule 12A and hence not applicable to LTUs. The non obstante clause of Rule 12A assumes significance in this context. The text of sub-rule (4) of Rule 12A, shorn of irrelevant portions, reads as follows: (4) A large tax payer may transfer, CENVAT credit available with one of his registered manufacturing premises or premises providing taxable service to his other such registered premises by, ‑ (i) making an entry for such transfer in the record maintained under rule 9; (ii) issuing a transfer challan containing registration number, name and address of the registered premises transferring the credit as well as receiving such credit, the amount of credit transferred and the particulars of such entry as mentioned in clause (i), and such recipient premises can take CENVAT credit on the basis of such transfer challan as mentioned in clause (ii); Provided that such transfer or utilization of CENVAT credit shall be subject to the limitation prescribed under clause (b) of sub-rule (7) of rule 3. Provided further that nothing contained in this sub-rule be applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f transfer of CENVAT credit under sub-rule (4) of Rule 12A, the transferor-unit should have initially taken the credit by making an entry in its CENVAT account maintained under Rule 9. In the same account, the transferor-unit should make another entry for transfer of the credit to its sister unit within the LTU. The latter unit (transferee/recipient unit) should also make corresponding entry in its CENVAT account maintained under Rule 9 upon receipt of the transfer challans issued by the other unit. The transfer challan should contain all the requisite particulars mentioned under clause (ii) of sub-rule (4) of Rule 12A. Whether the appellant, indeed, met these requirements is not clear from the records. This question was not examined by the learned Commissioner either. The claim of the appellant is that the transfer challans issued by the corporate office contained all the essential particulars for the purpose of availment of CENVAT credit by the recipient units. The learned counsel has referred to certain decisions while arguing that the CENVAT credits received by the three manufacturing units under cover of transfer challans cannot be denied to them on the ground of non-mention o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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