Tribunal grants waiver for denied CENVAT credit and penalty citing ISD registration issue

The Tribunal granted the appellant waiver of predeposit and stay of recovery for denied CENVAT credit of Rs.25,99,401/- and a penalty of Rs.72,000/- due to lack of Input Service Distributor (ISD) registration for the Head Office. The Department's argument based on Rule 9 of the CENVAT Credit Rules, 2004 was countered by the Tribunal citing precedents where similar defects were considered curable. The Tribunal found no misuse of input services and noted the lack of excess credit or misuse for exempted goods/services. Consequently, relief was granted to the appellant.

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Issues:
Waiver of predeposit and stay of recovery in respect of denied CENVAT credit and imposed penalty.

Analysis:
The appellant sought waiver of predeposit and stay of recovery for CENVAT credit of Rs.25,99,401/- denied to them along with a penalty of Rs.72,000/-. The credit in question was taken by the Ambattur Unit of the appellant-company, shared by three other manufacturing units. Disputes arose from show-cause notices issued for the period from April 2008 to March 2012, totaling to Rs.1.53 crores. The adjudicating authority denied a major portion of the credit to the appellant due to shared services and lack of Input Service Distributor (ISD) registration. The appellant contested this denial based on favorable precedents and argued that if registered as an ISD, credit could not have been denied. They also claimed that a significant part of the demand was time-barred.

The Department contended that Rule 9 of the CENVAT Credit Rules, 2004 required invoices issued by an ISD for credit availment. As the input services were shared by the four units without ISD registration, the credit could only be taken based on invoices from the Head Office, which was not registered as an ISD. The Department referred to a relevant case to support their argument. The Department challenged other arguments presented by the appellant's counsel.

Upon careful consideration, the Tribunal found that the Department did not allege misuse of input services by any unit. The only irregularity was the lack of ISD registration for the Head Office, resulting in the denial of credit. Precedents were cited where similar defects were deemed curable. The Tribunal noted that the Department did not claim excess credit or misuse for exempted goods/services. The plea of limitation was also considered, with a portion of the denied credit falling under the extended period. Given these factors, the Tribunal concluded that the relief of waiver of predeposit and stay of recovery could be granted to the appellant.

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