CENVAT credit on business input services allowed despite procedural defects, with proportionate reversal required for trading turnover.

CENVAT credit on input services used for the assessee's manufacturing business was held admissible despite invoices being in the head office name and the absence of Input Service Distributor registration, because these were procedural requirements and not substantive conditions where receipt and business use were established. Services used at the head office and other locations also qualified as input services under the then prevailing definition since they were connected with the overall business of manufacture, storage and sale. However, credit attributable to trading activity had to be reversed proportionately. Omission of the service provider's registration number on some invoices was likewise treated as a curable procedural defect and not a ground for denial of credit.

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Issues: (i) Whether CENVAT credit could be denied because input service invoices stood in the name of the head office and the assessee had not obtained Input Service Distributor registration; (ii) whether services used at the head office and other locations were ineligible as not being connected with manufacture; (iii) whether credit had to be reversed to the extent attributable to trading activity; and (iv) whether omission of the service provider's registration number on some invoices justified denial of credit.

Issue (i): Whether CENVAT credit could be denied because input service invoices stood in the name of the head office and the assessee had not obtained Input Service Distributor registration.

Analysis: The services were received and used for the assessee's manufacturing business, and the assessee had only one manufacturing unit. The absence of ISD registration was treated as a procedural requirement and not a substantive condition affecting eligibility to credit. The credit position was also found to be revenue-neutral and supported by settled precedent that procedural irregularity alone cannot defeat otherwise admissible credit.

Conclusion: Credit could not be denied on this ground; the issue was decided in favour of the assessee.

Issue (ii): Whether services used at the head office and other locations were ineligible as not being connected with manufacture.

Analysis: The assessee's overall business consisted of manufacture, storage and sale of goods, and the services used at different locations were connected with business activities integral to that enterprise. Under the then prevailing definition, services used in relation to business qualified as input services. The credit was therefore allowable for such services.

Conclusion: Credit was allowable on services used at the head office and other locations; the issue was decided in favour of the assessee.

Issue (iii): Whether credit had to be reversed to the extent attributable to trading activity.

Analysis: Trading activity was admitted to form a small part of the assessee's turnover, and the assessee accepted liability to reverse credit proportionate to the trading turnover. The Tribunal accepted proportionate reversal as the correct treatment.

Conclusion: Proportionate CENVAT credit attributable to trading turnover was recoverable from the assessee; the issue was decided partly against the assessee.

Issue (iv): Whether omission of the service provider's registration number on some invoices justified denial of credit.

Analysis: There was no dispute regarding receipt of services or payment of service tax by the provider. Non-mention of the registration number was treated as a procedural defect and not a ground to deny substantive credit where entitlement otherwise stood established.

Conclusion: Credit could not be denied merely for non-mention of the service provider's registration number; the issue was decided in favour of the assessee.

Final Conclusion: The assessee was entitled to CENVAT credit on the disputed input services, except for proportionate credit relatable to trading turnover, and the impugned order was set aside to that extent.

Ratio Decidendi: Procedural irregularities in documentation or ISD registration do not defeat CENVAT credit where receipt and use of input services for business are established, but credit relatable to non-eligible trading activity must be reversed proportionately.

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