2016 (9) TMI 944 - AT - Service Tax

Tribunal allows Cenvat credit on input services via ISD invoices

The Tribunal set aside the order disallowing Cenvat credit on input services, amounting to Rs. 3,07,964, as the appellant obtained the credit through ISD ... Availment of Cenvat credit on the basis of Input Service Distributor (ISD) invoices - Liability of the Input Service Distributor to justify eligibility of distributed credit - Propriety of issuing recovery proceedings against recipient of ISD credit instead of the ISDAvailment of Cenvat credit on the basis of Input Service Distributor (ISD) invoices - Liability of the Input Service Distributor to justify eligibility of distributed credit - Propriety of issuing recovery proceedings against recipient of ISD credit instead of the ISD - Whether the proceedings disallowing Cenvat credit availed by the appellant on the basis of ISD invoices were maintainable against the appellant, or ought to have been initiated against the Input Service Distributor who actually availed and distributed the credit. - HELD THAT: - The Tribunal found that the appellant had availed credit on the basis of invoices issued by their Head Office acting as an Input Service Distributor and produced those ISD invoices before the authorities. No proceedings had been initiated against the ISD. Reliance was placed on the Tribunal's earlier decision in United Phosphorus Ltd. v. CCE, Surat II, which holds that the eligibility of credit passed on by an ISD must be examined at the end of the ISD and that proceedings challenging the correctness of credit ought to be directed to the ISD who availed and proposed to distribute the credit. The Commissioner (Appeals) did not record specific findings on this important issue. In these circumstances the initiation of demand and recovery proceedings against the appellant (recipient of ISD credit) was held to be unsustainable, and the impugned order confirming disallowance was set aside.The demand and related order disallowing Cenvat credit insofar as it was availed on the basis of ISD invoices was set aside and the appeal allowed; proceedings, if any, should be directed to the Input Service Distributor.Final Conclusion: The Tribunal set aside the order of the Commissioner (Appeals) and allowed the appeal, holding that challenge to the admissibility of credit distributed by an ISD must be directed to the ISD and not to the recipient assessee who received credit on the basis of ISD invoices. Issues: Disallowance of Cenvat credit on input services; Appeal against order dated 25/2/16; Challenge of demand for reversal of Cenvat credit; Validity of Cenvat credit availed on ISD invoices; Eligibility of services for export of goods as input services.The judgment pertains to an appeal against the order of the Commissioner (Appeals) regarding the disallowance of Cenvat credit amounting to Rs. 3,07,964. The dispute arose as the Revenue contended that the Cenvat credit was availed on input services not qualifying under Rule 2 (l) of the Cenvat Credit Rules, 2004. The services in question included insurance and handling of final products post-factory removal, as well as insurance of motor vehicles and transit insurance of goods beyond the place of removal. The appellant voluntarily reversed a portion of the amount but contested the remaining demand based on various grounds.The appellant argued that the Cenvat credit was obtained through invoices from their Head Office as an Input Service Distributor (ISD). They contended that any improper credit availed should be addressed with the ISD who originally availed and transferred the credit. Additionally, they relied on legal precedents to support their claim that services availed for export of goods qualify as input services, citing decisions such as Central Excise vs. Inductotherm India P. Ltd. and CCE, Jaipur II vs. J.K. Cement Works. On the other hand, the Revenue maintained that the appellant failed to provide sufficient evidence, such as export invoices, to prove that goods were exported through a merchant exporter and that the place of removal should be considered the factory gate.Upon review, the Tribunal found that the appellant had availed Cenvat credit based on ISD invoices, and noted that no proceedings had been initiated against the ISD for availing non-qualifying credits. Citing the decision in United Phosphorus Ltd. vs. CCE, Surat II, the Tribunal emphasized that proceedings should have been directed towards the ISD rather than the appellant. As such, the Tribunal concluded that the dispute initiated by the Revenue against the appellant for availing Cenvat credit on ISD invoices should be set aside, as the proper party to address such issues would be the ISD. Consequently, the impugned order was set aside, and the appeal was allowed.In summary, the judgment highlights the importance of addressing Cenvat credit disputes with the relevant party, in this case, the ISD, who initially availed and distributed the credits. The Tribunal's decision underscores the necessity of directing proceedings towards the appropriate entity and ensuring that the correct party is held accountable for any discrepancies in availing Cenvat credits on input services.