Input Service Distributor credit routing must satisfy statutory invoicing and registration rules; interim recovery restraint was refused.

An Input Service Distributor may distribute input tax credit only within the statutory framework requiring inward supply, registration and prescribed invoicing. On the materials presented, no clear statutory basis supported routing excess credit from the Odisha unit through the Mumbai office, and no inward supply from the Odisha unit to the Mumbai ISD was shown. The Court treated the arrangement as prima facie unsupported and capable of attracting proceedings under Section 74, and declined interim restraint against recovery while leaving the broader jurisdictional challenge open.

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Issues: Whether the petitioner made out a prima facie case to restrain recovery proceedings under Section 74, and whether the credit distribution arrangement through the alleged Input Service Distributor conformed to the statutory scheme.

Analysis: The arrangement disclosed that the Odisha unit had generated excess unutilized input tax credit, but the Court found no clear statutory basis for treating the Mumbai office as a genuine conduit for distribution of that credit to other units. The statutory scheme governing an Input Service Distributor requires receipt of inward supply invoices and compliance with the prescribed registration and invoicing framework. On the materials placed, no inward supply from the Odisha unit to the Mumbai ISD was shown, and the alleged facilitation services were not supported by documentary or statutory foundation. The Court therefore held that the transactions prima facie amounted to wrongful routing of tax credit and justified invocation of proceedings under Section 74. At the same time, the Court declined interim restraint on recovery while issuing notice on the broader jurisdictional challenge.

Conclusion: The petitioner was not entitled to protection against recovery at the interim stage, and the proceeding under Section 74 was permitted to continue.

Final Conclusion: Interim relief against recovery was refused, the challenge was kept open for further consideration, and the matter was directed to proceed on notice.

Ratio Decidendi: An Input Service Distributor can distribute credit only in accordance with the statutory requirements of inward supply, registration, and prescribed invoicing, and a prima facie unsupported credit-routing arrangement may justify proceedings under Section 74 and refusal of interim restraint.

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