2020 (3) TMI 1304 - AT - Service Tax

Tribunal allows appeals, rejects duty demand, upholds credit entitlement.

The Tribunal allowed the appeals filed by M/s. Hical Technologies Pvt. Ltd., setting aside the demand for duty, interest, and penalty. The judgment ... Entitlement to distribute Cenvat credit - curability of delayed Input Service Distributor registration - effect of invoices addressed to units other than registered ISD - eligibility of input service credit for 100% EOU/export of exempted goods - scope of input service under Rule 2(l) of the Cenvat Credit Rules prior to March 2011 - eligibility of credit on catering, C&F, freight on export, travel and vehicle maintenance servicesEntitlement to distribute Cenvat credit - curability of delayed Input Service Distributor registration - Delay in obtaining ISD registration is a procedural lapse and does not disentitle the assessee from distributing Cenvat credit for the period prior to registration. - HELD THAT: - The Tribunal accepted that receipt of input services and payment of service tax were not in dispute. Reliance was placed on the decision of the Hon'ble Gujarat High Court in Doshion Ltd., which held that non-obtaining of ISD registration is a curable procedural irregularity and does not automatically disentitle an assessee from availing Cenvat credit where records are maintained and available for verification. Applying that principle, and noting that ISD registration was eventually obtained, the Tribunal held that belated registration cannot be a ground to deny the credit and allowed distribution of credit for the impugned period. [Paras 7]Credit distributed prior to ISD registration is allowable; denial on this ground set aside.Effect of invoices addressed to units other than registered ISD - entitlement to distribute Cenvat credit - Invoices addressed to the EHTP or DTA units other than the premises where ISD registration was obtained do not disentitle the assessee from Cenvat credit where services were received and tax paid. - HELD THAT: - The Tribunal noted there was no dispute about receipt of services or payment of service tax. It applied established precedents to the effect that substantial benefit of credit should not be denied on technical or procedural grounds relating to invoice particulars or address, particularly where the services have been received and taxes paid and records are available for verification. Accordingly, the denial of credit on account of invoice addressing was rejected. [Paras 7]Denial of credit based on invoices being addressed to other units set aside; credit upheld.Eligibility of input service credit for 100% EOU/export of exempted goods - Credit is eligible even where the 100% EOU unit manufactures exempted goods that are exported, since the intention is export of goods and not taxation. - HELD THAT: - The Tribunal accepted the appellant's submission that exemption of goods manufactured for export does not bar the availment of input service credit, because the policy objective favors export of goods and not levying tax on exported products. Applying this principle to invoices pertaining to the 100% EOU unit, the Tribunal held there was no reason to deny credit for services connected with goods intended for export despite those goods being exempted. [Paras 8]Credit relating to services for 100% EOU/export of exempted goods is allowable.Scope of input service under Rule 2(l) of the Cenvat Credit Rules prior to March 2011 - eligibility of credit on catering, C&F, freight on export, travel and vehicle maintenance services - No restriction existed in the definition of 'input service' during the impugned period to deny credit on catering, C&F, freight on export, travel and vehicle maintenance services; such credits are allowable. - HELD THAT: - The Tribunal examined the definition of 'input service' under Rule 2(l) as it stood prior to the March 2011 amendment and observed it was broadly worded to cover services used in or in relation to manufacture of final products, without specific exclusions for the services in question. It followed precedents cited by the appellant (including decisions in Bharat Heavy Electricals Ltd. and Sansera Engineering Pvt. Ltd.) holding similar services to be eligible for credit in the pre-amendment period, and accordingly found no justification to deny the credits claimed for catering, C&F, export freight, travel and vehicle maintenance. [Paras 9]Credit on the specified services for the impugned period is allowable; denial on this ground set aside.Final Conclusion: All demands of duty, interest and penalty were set aside and the appeals of the assessee were allowed, with consequential relief as per law. Issues:Entitlement of appellant to distribute credit of input services; Denial of credit due to invoices addressed to units other than ISD unit; Denial of credit on services for EHTP unit manufacturing exempted goods; Denial of credit on specific services like catering, C&F services, freight on export, travel expenses, and vehicle maintenance expenses.Entitlement of appellant to distribute credit of input services:The judgment involved appeals by M/s. Hical Technologies Pvt. Ltd. regarding Show Cause Notices issued for the period October 2010 to January 2011. The issue revolved around denial of Cenvat credit on various grounds, including distribution of credit before ISD registration, invoices addressed to different units, and credit on specific services. The appellant, engaged in camera manufacturing, obtained ISD registration and faced challenges on credit distribution. The Tribunal cited precedents, like Doshion Ltd. case, emphasizing that procedural lapses like delayed ISD registration should not disentitle credit if goods/services and tax payment are valid.Denial of credit due to invoices addressed to units other than ISD unit:Regarding invoices addressed to units other than the ISD unit, the Tribunal noted that the appellant received services, paid taxes, and the entitlement to credit was upheld in previous decisions. Upholding the appellant's credit eligibility, the Tribunal emphasized that substantial benefits of credit should not be denied on technical or procedural grounds, aligning with judicial precedents.Denial of credit on services for EHTP unit manufacturing exempted goods:The Tribunal supported the appellant's eligibility for credit on services for the EHTP unit manufacturing exempted goods exported outside India. It emphasized that the intention is to export goods, not taxes, hence credit should not be denied on exempted goods meant for export. This decision aligned with the government's objective of promoting exports.Denial of credit on specific services like catering, C&F services, freight on export, travel expenses, and vehicle maintenance expenses:The Tribunal rejected the denial of credit on specific services like catering, C&F services, freight on export, travel expenses, and vehicle maintenance expenses. It highlighted that the definition of 'input services' during the period in question was broad, encompassing services related to manufacturing final products without exclusions. Citing precedents like Bharat Heavy Electricals Ltd. case, the Tribunal upheld the appellant's eligibility for credit on these services, emphasizing the absence of restrictions in the definition.In conclusion, the Tribunal set aside the demand for duty, interest, and penalty, allowing the appeals filed by the assessee with consequential relief as per law. The judgment focused on upholding the appellant's entitlement to distribute credit of input services, rejecting denials based on technical grounds, and emphasizing the broad scope of eligible services under the relevant rules.