2017 (6) TMI 935 - AT - Central Excise

Unit can utilize service tax credit without Registration Certificate per Cenvat Credit Rules

The Tribunal allowed the appeal of M/s. Ramkrishna Forging Ltd., holding that one unit could avail and utilize service tax credit passed on by the Head ... CENVAT credit - input service distributor - whether one of the unit out of the four units can avail and utilize service tax credit passed on by the Head Office in the capacity of Input Service Distributor to the exclusion of other units and that too without taking any Registration Certificate? - Held that: - Hon’ble Karnataka High Court in the case of Commissioner of Central Excise, Bangalore-I vs. ECOF Industries Pvt. Ltd. [2011 (4) TMI 560 - KARNATAKA HIGH COURT] observed that the assessee is entitled to distribute the Cenvat Credit on input service on its manufacturing units or other units providing output service. Rule 7 does not impose any restriction. In the case of Doshion Ltd. vs. Commissioner of Central Excise, Ahmedabad [2012 (10) TMI 952 - CESTAT AHMEDABAD] the Tribunal observed that there being no restriction for utilization of Cenvat Credit of input service without allocating proportionately to various units during the relevant period and the omission to take registration as input service distributor can at least be considered as procedural irregularity. Appeal allowed - decided in favor of appellant. Issues:Whether one unit out of multiple units can avail and utilize service tax credit passed on by the Head Office as an Input Service Distributor without a Registration CertificateRs.Analysis:The case involved M/s. Ramkrishna Forging Ltd., where Unit-II at Howrah appealed against the disallowance of Cenvat Credit by the Adjudicating Authority. The issue was whether one unit could avail and utilize service tax credit passed on by the Head Office without a Registration Certificate. The Adjudicating Authority framed the issue based on Rule 7 of the Cenvat Credit Rules, 2004, governing the distribution of credit by an Input Service Distributor.The appellant had availed various input service credits, and the Revenue contended that the Input Service Distributor cannot pass on the entire credit to one unit. Additionally, there was no provision in the Rules for credit distribution before obtaining registration. The Hon’ble Karnataka High Court's decision in Commissioner of Central Excise, Bangalore-I Vs. ECOF Industries Pvt. Ltd. was cited, emphasizing that the assessee could distribute Cenvat Credit on input services to manufacturing units or other units providing output services without restrictions.Moreover, the Tribunal in Doshion Ltd. vs. Commissioner of Central Excise, Ahmedabad observed that during the relevant period, there was no restriction on utilizing Cenvat Credit without allocating proportionately to various units. The omission to register as an Input Service Distributor was considered a procedural irregularity, leading to a revenue-neutral outcome. The Tribunal's decision aligned with the Karnataka High Court's ruling in ECOF Industries Pvt. Ltd.The legal counsel presented various decisions supporting the appellant's position, ultimately leading to the Tribunal setting aside the impugned orders and allowing the appeal. The judgment emphasized the applicability of Rule 7 of the Cenvat Credit Rules and previous judicial interpretations, highlighting the entitlement of units to distribute credit as per the rules, irrespective of registration status.In conclusion, the judgment clarified the permissible distribution of Cenvat Credit by Input Service Distributors among units, emphasizing compliance with Rule 7 while considering procedural irregularities sympathetically in the absence of legal requirements for credit utilization.