CX - objection by department that credit from one unit was utilized for purpose of duty liability of other unit without pro rata distribution by Input service distributor would not survive in view of no previous restriction in rule 7 of CCR, 2004: HC
By TIOL News Service:
JAIPUR, MAY 12, 2016: THE appellant is a manufacturer of Ball Bearing and has three units at Jaipur, Manesar and Newai, Head Office being at Jaipur. They availed credit of tax paid on the following services viz. Selling Commission, Royalty, Consultancy & Professional, Banking Charges, Audit Fee, AMC Charges etc.
In all these cases, the service providers raised invoices in the name of the Head Office. The Jaipur unit of the appellant took CENVAT Credit on all these services.
The case of the Revenue is that as their head office is not registered as Input Service distributor (ISD), therefore, Jaipur unit is not entitled to take CENVAT Credit. It is also the case of Revenue that all the services in question have not been utilized by Jaipur unit and hence, they could not have taken all the credit.
The demands for the period February 2006 to March 2009 were confirmed along with imposition of interest and penalty.
The CESTAT while allowing the appeals - 2015-TIOL-1976-CESTAT-DEL observed that the issue as to whether non-registration as Input Service distributor can be fatal for denial of Cenvat Credit to the appellant had come up before the Tribunal in the case of Demosha Chemicals Pvt. Ltd. - 2014-TIOL-534-CESTAT-AHM, Doshion Ltd. - 2013-TIOL-395-CESTAT-AHM and wherein it was held that credit cannot be denied even in the absence of registration of the Head Office as ISD.
Revenue is unhappy with the reliance placed on the cited decisions in the order and have, therefore, knocked the doors of the Rajasthan High Court.
The primary argument is that there are three different units and all were independent and there was no nexus at all in between them and merely for the namesake, the other units were functioning. Furthermore, even as per the assessee 85.86% was the total turnover of the unit at Jaipur which clearly indicated that the other units were only for the name sake.
The High Court noted that the Tribunal decision in Doshion Ltd. Vs. CCE Ahmedabad (supra ) was challenged by the Department and the Gujarat High Court had dismissed the appeal of the Revenue - 2016-TIOL-111-HC-AHM-ST .
It was further observed -
++ At the relevant time, Rule 7 (of CCR, 2004) permitted input service distributor to distribute Cenvat Credit in respect of service tax paid on the input service to its manufacturing units or units providing output service, subject to the two conditions, viz:- (a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon;(b)credit of service tax attributable to service [used by one or more units] exclusively engaged in manufacture of exempted goods or providing of exempted service shall not be distributed.
++ It was only later on that additional condition by way of Clause-(d) of Rule 7 was added [Notfn. 18/2012-CE(NT) refers], which reads as under:-
"credit of service tax attributable to service used by more than one unit shall be distributed pro rata on the basis of the turnover of such units during the relevant period to the total turnover of all its units, which are operational in the current year, during the said relevant period."
++ The objection of the department, therefore, that the credit from one unit was utilized for the purpose of duty liability of other unit without pro rata distribution by the input service distributor, therefore, would not survive in view of no previous restriction of this nature flowing from Rule 7 of the Rules of 2004. The respondent has been able to prove that all the three units are one and the same; have common management and the Revenue has not been able to disprove this fact.
The Revenue appeals were dismissed.
(See 2016-TIOL-922-HC-RAJ-CX)
