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TMI Blog2016 (8) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... services is distributed or intended to be distributed to their manufacturing factories of ITC Ltd. at Bangalore (Karnataka), Saharanpur (Uttaranchal), Munger (Bihar). Consequently, Revenue s argument that input service distributor s operations are within the mischief of Rule 7(b) of CENVAT Credit Rules is without any foundation and is hereby rejected. Credit allowed - Decided in favor of assesseee. - E/253/2012 - Final Order No. 20540 / 2016 - Dated:- 12-7-2016 - Shri S. S. Garg, Judicial Member And Shri Ashok K. Arya, Technical Member Mr. K. S. Ravi Shankar, Sr. Advocate Mr. Anirudh, Advocate For the Appellant Mr. Parashiva Murthy, (AR) For the Respondent ORDER Per Ashok K. Arya The appellant viz., ITC Limited, Bangalore is before this Tribunal aggrieved with the Order of the Commissioner of Central Excise, Bangalore-II whereunder CENVAT credit of ₹ 3,25,80,308/- was held as inadmissible and the demand of the said inadmissible CENVAT credit was confirmed along with interest, and equivalent penalty was also imposed. 2. The appellant has been represented by the learned Sr. Advocate, Shri K. S. Ravi Shankar, who has inter alia pleaded as belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tobacco Board, threshing and separation of such leaf and stem, packing and dispatch to the warehouses for onward transportation to the factories in Bangalore it is only such of those credits that are related to post threshing and separation activity at the ILTD which have been distributed and ought not to have been questioned or denied, since procurement of inputs for manufacture of cigarettes is inevitable for manufacture of cigarettes on which duty is paid. The order is therefore wrong in law. * There is no evidence on record led by the Revenue to establish that the credits distributed relate to pre-threshing and separate activity done at the ILTD. The order is therefore based on specious theories and has no legal basis whatsoever, Assumptions and presumptions have run rife and conjectures and surmises have led the Respondent away from the path of justice delivery. * The appellant submits that the lower authority has misconstrued the text and tenor of Rule 7 of the Cenvat Credit Rules by not appreciating that the rules permit in terms of the definition of ISD in Rule 2(m) an office of the manufacturer of final products to receive cenvatable invoices to distribute the credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saying that they are rightly eligible to claim CENVAT credit of the service tax paid on input services of their Indian Leaf Tobacco Division (ILTD) located at Guntur. 2.2 The learned advocate, Mr. K. S. Ravi Shankar has also referred to provisions of Section 2(m), which gives the definition and meaning of Input Service Distributor (ISD), and Rule 7 of CENVAT Credit Rules, 2004. He has relied on the following case-laws in support. * ECOF Industries Pvt. Ltd. vs. CCE, Bangalore: 2010 (17) S.T.R. 515 (Tri.-Bang.) * CCE, Bangalore-I vs. ECOF Industries Pvt. Ltd.: 2011 (271) E.L.T. 58 (Kar.) * ITC Ltd. vs. CCE, Bangalore: 2007 (208) E.L.T. 277 (Tri.-Bang.) * CCE, Bangalore-II vs. ITC Ltd.: 2010 (257) E.L.T. 514 (Kar.) * Commissioner vs. ITC Ltd.: 2013 (295) E.L.T. A64 (S.C.) * Ugam Chand Bhandari vs. CCE, Madras: 2004 (167) E.L.T. 491 (S.C.) * Commissioner of Sales Tax vs. Indokem Pvt. Ltd. by Bombay High Court decision dated 7th December 1974 * Goa Urban Co-operative Bank Ltd. vs. Noor Mohd. Sheikh Mussa and Another: AIR 2004 SUPREME COURT 3886. 3. The Revenue has been represented by learned AR, Shri Parashiva Murthy, who has inter alia argued as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the meaning of an input service distributor . 2(m) input service distributor means an 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 . 5.2 The Revenue has argued that in the light of provisions of Rule 7B of CENVAT Credit Rules, 2004, input service distributor viz., ILTD, Guntur cannot legally distribute the CENVAT credit in respect of service tax paid on the input services consumed by them. The provisions of Rule 7 of CCR are reproduced below: Rule 7. Manner of distribution of credit by input service distributor. The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following condition, namely:- (a) The credit distributed against a document referred to in rule 9 does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.3 Further, on this subject, we reproduce findings from the Additional Commissioner of Central Excise, Bangalore-II Commissionerate s Order-in-Original No.49/2013 dated 29.11.2013. 24. ........ I find that in the absence of any evidence to the contrary, the impugned services are not hit by the bar as contained in Rule 7(b) of the Cenvat Credit Rules 2004 and I also find that the services are squarely covered within the description of input services as per Rule 2(l)(i) of the Cenvat Credit Rules 2004. I find that the services for which input service credit is sought to be distributed by ILTD to various units of ITC are specifically covered in the definition of input service as highlighted above. Therefore I find that there can be no bar in permitting credit on the input services being distributed by ILTD to various units of ITC as an Input Service Distributor. 5.3.1 On the same subject matter, the Commissioner of Central Excise (Appeals), Bangalore in its Order-in-Appeal No.44-45/2014-CE dated 31.1.2004 has also concluded as follows: 11. ...... In the instant case, the impugned services relate to warehousing of unmanufactured tobacco and transport of the same to their ciga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 exempted services. 9. In fact, the Board has issued a circular clarifying in this regard, which is extracted by the tribunal at para 7 which reads as under :- Para 2.3 of the Master Circular referred to by the ld. Para 7. Advocate reads as under :- An Input service distributor 2.3 is an office or establishment of a manufacturer of excisable goods or provider of taxable service. It receives tax paid invoices/bills of input services procured (on which Cenvat credits can be taken) and distributes such credits to its units providing taxable services or manufacturing excisable goods. The distribution of credit is subject to the conditions that - (a) the credit distributed against an eligible document shall not exceed the amount of service tax paid thereon, and (b) credit of service tax attributable to services used in a unit either exclusively manufacturing exempted goods or excl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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