Tribunal allows appeal, setting aside Commissioner's order on CENVAT Credit. Rules don't mandate registration for distributor.

The Tribunal allowed the appeal, setting aside the Commissioner (Appeals) order dated 28/02/2018, as there was no irregularity in the appellant's availing of CENVAT Credit for common input services without obtaining a license for input service distribution. The Tribunal found the credit admissible and concluded that the rules did not mandate registration for input service distributor distribution, giving the central unit discretion to distribute or retain the credit. Consequently, the duty demand of Rs. 24,63,410/- against the appellant was set aside.

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Issues:
Admissibility of CENVAT Credit on common inputs without obtaining license for input service distribution.

Analysis:
The case involved the admissibility of CENVAT Credit on common inputs like Chartered Accountants Services, Banking & other Financial Services, Management, Consultants Services to the registered office of the appellant with multiple units without obtaining a license for input service distribution. An EA 2000 audit revealed that the appellant had availed and utilized input service credit for all five units illegally as it had not obtained IST registration, a mandatory requirement under Rule 2(m) and Rule 7 of the CCR Rules. Consequently, a duty demand of Rs. 24,63,410/- was confirmed against the appellant, along with interest and penalties. The appellant challenged the audit report and subsequent show cause notice, leading to the matter being adjudicated, and the duty demand being upheld by the Commissioner (Appeals), prompting the appeal to the Tribunal.

During the appeal, the appellant argued that even if distribution through IST had been done, there would be no change in the credit availed, rendering the demand unsustainable due to revenue neutrality. The appellant relied on judicial decisions to support this contention. In response, the department's representative contended that the revenue-neutral situation was not raised before the lower authorities and could not be introduced at the Tribunal stage. The department supported the Commissioner (Appeals) order.

After hearing both sides and examining the relevant provisions of the CENVAT Credit Rules, the Tribunal analyzed the rules concerning the distribution of credit by input service distributors. It was noted that the rules did not mandate registration for IST distribution, giving the central unit the discretion to distribute or retain the credit. The Tribunal concluded that there was no irregularity in the appellant's availing of CENVAT Credit for common input services. As the credit was deemed admissible, the discussion on the legality of the period invocation lost significance, leading to the setting aside of the Commissioner (Appeals) order.

In the final judgment, the Tribunal allowed the appeal, setting aside the Commissioner (Appeals) order dated 28/02/2018. The decision was pronounced in court on 22/02/2019.

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