Tribunal allows appeal for CENVAT credit on service tax under reverse charge mechanism

The Tribunal allowed the appeal, emphasizing the appellant's eligibility to avail CENVAT credit for service tax paid under the reverse charge mechanism for 'Intellectual Property Rights Service' and 'Information Technology Software Service'. The Tribunal found the Revenue's argument regarding distribution of service tax credit across various units unsustainable, noting that the appellant had discharged the service tax liability and was entitled to the credit. The impugned order was set aside, affirming the appellant's right to avail the CENVAT credit.

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Issues:
1. Eligibility to availment of CENVAT credit of service tax paid under reverse charge mechanism for 'Intellectual Property Rights Service' and 'Information Technology Software Service'.
2. Dispute regarding distribution of service tax credit to various units across the country.

Analysis:
Issue 1: The primary issue in this case revolves around the eligibility of the appellant to avail CENVAT credit for service tax paid under the reverse charge mechanism for 'Intellectual Property Rights Service' and 'Information Technology Software Service' between October 2009 to March 2014. The appellant contended that they discharged the service tax liability under reverse charge mechanism and availed CENVAT credit for services received from the parent company. The dispute arose from the Revenue's claim that the credit should have been distributed to various units across the country, not just availed at Pune.

Issue 1 Analysis: The Tribunal found the impugned order unsustainable for multiple reasons. Firstly, it noted that the Pune unit was also providing dutiable services and discharging service tax liability during the relevant period. The Revenue's argument that the credit should have been distributed on a pro-rata basis was deemed unacceptable as specific rules for such distribution were only framed after 2012. Secondly, since there was no dispute regarding the discharge of service tax on the rendered services, the Tribunal concluded that there was no valid reason to reject the appellant's claim for CENVAT credit.

Issue 2: The secondary issue pertained to the distribution of service tax credit to various units across the country. The Tribunal observed that if the Pune unit had distributed the credit to other units on a pro-rata basis, those units would have also been eligible for CENVAT credit. It was noted that during the relevant period, the other units were also discharging service tax liability in cash, making the exercise revenue neutral. Consequently, the Tribunal held that rejecting the appellant's claim for CENVAT credit was unsustainable and set aside the impugned order, allowing the appeal.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, emphasizing the appellant's eligibility to avail CENVAT credit for the service tax paid under the reverse charge mechanism for the specified services.

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