CENVAT credit distribution across units held permissible without proportionate utilisation, subject to overall credit limits and exempted services

CENVAT credit of input services may be distributed across different units of the same assessee without any requirement of proportionate utilisation by each unit. The Tribunal held that the CENVAT Credit Rules, 2004 do not restrict the amount of credit that may be so distributed, and the department cannot impose a proportional-use condition. It also followed its earlier decision that such distribution is permissible so long as the overall credit does not exceed the service tax paid and the credit does not relate to exempted goods or services. The departmental restriction was therefore unsustainable.

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Issues: Whether credit of input services could be distributed and utilised across different units of the same assessee without insisting on proportionate utilization by each unit.

Analysis: The Tribunal noted that the CENVAT Credit Rules, 2004 do not impose any restriction on the amount of credit that may be distributed between different units of the same assessee. It further held that the departmental authorities could not insist that such credit be utilized proportionately by each unit. The Tribunal also found the dispute covered by its earlier decision recognizing that, subject to the overall credit not exceeding the service tax paid and not relating to exempted goods or services, distribution across units is permissible.

Conclusion: The issue was decided in favour of the assessee, and the departmental restriction was held unsustainable.

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