Input service credit under Rule 7 is not confined to the manufacturing unit where the product is made.
Rule 7 of the Cenvat Credit Rules, 2004 permits an input service distributor to distribute service tax credit if the distributed amount does not exceed the tax paid and the credit is not attributable exclusively to exempted goods or exempt services. The rule does not impose any further restriction that credit can be availed only by the manufacturing unit in which the underlying product is produced. Accordingly, a manufacturing unit may take distributed credit even where the related advertisement service pertains to a product manufactured by another unit, provided the Rule 7 conditions are satisfied.
Issues: Whether, under Rule 7 of the Cenvat Credit Rules, 2004, service tax credit distributed by an input service distributor can be taken by a manufacturing unit other than the unit in which the underlying product is manufactured.
Analysis: Rule 7 regulates distribution of credit by an input service distributor by requiring that the distributed credit does not exceed the service tax paid and that credit relating exclusively to exempted goods or exempt services is not distributed. On that framework, the restriction pressed by the Revenue, namely that credit could be availed only in the unit where the product was manufactured, is not found in the rule. The assessee was therefore entitled to distribute and avail the credit in its unit notwithstanding that the advertisement service related to a product manufactured by another unit.
Conclusion: The restriction urged by the Revenue is not part of Rule 7, and the assessee was entitled to the credit.
Final Conclusion: The appeal failed as no substantial question of law arose, and the Tribunal's view on admissibility of the distributed service tax credit was upheld.
Ratio Decidendi: Rule 7 of the Cenvat Credit Rules, 2004 permits distribution of input service credit so long as the prescribed monetary limit and the exclusion for services used exclusively for exempted goods or exempt services are respected; it does not confine credit to the unit in which the relevant product is manufactured.
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AI Drafter ✕
TaxTMI 
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