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ST - Rule 14 of CCR can be made applicable only on person who avails CENVAT credit wrongly or utilizes credit and it is not invokable against ISD: CESTAT

 

By TIOL News Service

MUMBAI, APRIL 17, 2018: THE The appellant has distributed the credit in the capacity of Input Service Distributor among their factories situated at various places.

They were issued show cause notice dt. 15.04.2013 on the ground that they have wrongly availed cenvat credit in respect of Haridwar Unit which is manufacturing excisable goods which are exempted from duty in terms of Notification No. 50/2003-CE.

The adjudicating authority confirmed the demand in terms of Rule 14 of CCR, 2004 r/w s.73 (2) of the FA, 1994.

In appeal before the CESTAT, the appellant submitted that they are merely an Input Service Distributor and havethemself not availed any CENVAT credit, hence recovery in terms of Rule 14 is not sustainable. The decisions in their own case for the previous period -  2017-TIOL-2364-CESTAT-MUM  and  Godrej Boyce Mfg. Co. Ltd. -  2014-TIOL-1188-CESTAT are relied upon.

The AR submitted that in terms of Rule 9 of CCR, 2004 the Input Service Distributor has to avail CENVAT credit and distribute it; that responsibility is cast upon the ISD to file returns of such availment and distribution of credit; that where credit has been wrongly taken Rule 14 of CCR would apply; that Rule 7 casts responsibility and determines the manner of distribution of the credit so taken for distribution; that statutory provisions cannot be interpreted to allow benefit of the inadmissible credits to the class of persons who are functioning as an ISD vis-à-vis the class of persons who are not functioning as an ISD.

The Bench observed that the Input Service Distributor registration is only for the purpose of distribution of credit and the ISD can be held accountable only in case of improper distribution of credit, which is not the issue in the present case.

Noting that the CESTAT in the previous proceeding against the Appellant as reported in  -  2017-TIOL-2364-CESTAT-MUMBAI  has already held that Rule 14 of CCR can be made applicable only on the person who avails the Cenvat credit wrongly or utilizes the credit and it is not invokable against the Input Service Distributors, the findings therein were extracted in extenso and accordingly the impugned order was set aside and the appeal was allowed with consequential relief.

(See 2018-TIOL-1235-CESTAT-MUM)


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