2022 (8) TMI 1106 - AT - Service Tax

Tribunal rules in favor of appellant for cenvat credit claim

The Tribunal ruled in favor of the appellant, finding that they correctly availed cenvat credit for the actual amount attributable to them, amounting to ... Cenvat credit admissibility - Centralised registration and payment of service tax - Requirement of ISD invoice for distribution of credit - Reverse charge mechanism - Proof of credit availed / burden of establishmentCenvat credit admissibility - Proof of credit availed / burden of establishment - Whether the demand for alleged utilisation of cenvat credit of Rs. 20,72,909/- against the appellant is sustainable. - HELD THAT: - The records submitted by the appellant consistently show that the service tax of Rs. 20,72,909/- was a cumulative payment on behalf of five units and that the appellant (unit V) had actually availed cenvat credit only of Rs. 1,24,129/-. There is no evidence on record at any stage that the appellant had taken credit of Rs. 20,72,909/-. The show cause notice and subsequent orders proceeded on the basis that the entire paid amount had been availed by the appellant, but the authorities failed to verify the documentary record already on file. Since the department did not discharge the burden of establishing that the appellant availed the larger credit, the foundational premise for the demand is absent and the demand cannot be sustained.Demand of Rs. 20,72,909/- (and consequential interest and penalty) is set aside as not sustainable.Requirement of ISD invoice for distribution of credit - Centralised registration and payment of service tax - Whether the cenvat credit of Rs. 1,24,129/- availed by the appellant is admissible despite payment of service tax by the centrally registered Unit No. II and absence of an ISD invoice from Unit No. II. - HELD THAT: - The adjudicating authority and first appellate authority denied the credit on the ground that Unit No. II (centralised registration) should have issued an ISD invoice. The Tribunal found that the invoice of the service provider was in the name of the appellant unit (unit V) and the service was received by that unit. The requirement of issuance of an ISD invoice by the centrally registered unit arises when invoices are in the name of the Head Office or where distribution by ISD is necessary. Where the invoice is in the name of the recipient unit, no ISD invoice is required for that unit to avail credit. Accordingly, the appellant correctly availed the cenvat credit of Rs. 1,24,129/-.Cenvat credit of Rs. 1,24,129/- is admissible and was correctly availed by the appellant.Final Conclusion: The appeal is allowed: the cenvat credit of Rs. 1,24,129/- is confirmed as admissible and the demand, interest and penalty based on alleged utilisation of Rs. 20,72,909/- are set aside. Issues: Disallowance of cenvat credit due to payment of service tax by centralized registered unit; Denial of credit for lack of ISD invoice issuance; Verification of cenvat credit availed by appellant.Issue 1: Disallowance of cenvat credit due to payment of service tax by centralized registered unitThe case involved a situation where the appellant's company had five units, with Unit II having centralized registration for service tax payment. The appellant paid service tax on certain services under reverse charge mechanism, with invoices raised in the name of individual units but payment made by Unit II. The department alleged that the entire service tax paid by Unit II was availed as cenvat credit by Unit V, leading to a demand notice for disallowance of cenvat credit. The adjudicating authority and Commissioner (Appeals) upheld the demand, prompting the appellant to file an appeal. The appellant argued that each unit availed cenvat credit for their respective invoices, and the demand against them was incorrect. The Tribunal found that the appellant had only availed credit for Rs. 1,24,129, not the entire amount, and the authorities failed to verify this fact from the records. The Tribunal concluded that the demand was unsustainable as the appellant had correctly availed the credit for the actual amount attributable to them.Issue 2: Denial of credit for lack of ISD invoice issuanceThe appellant's credit of Rs. 1,24,129 was denied by the adjudicating authority and Commissioner (Appeals) on the grounds that Unit II, being centralized registered, should have issued an Input Service Distributor (ISD) invoice. However, since the invoices were in the name of the appellant unit itself, the Tribunal held that there was no requirement for an ISD invoice. The Tribunal emphasized that the necessity of an ISD invoice arises when the service provider's invoice is in the name of the Head Office, which was not the case here. Therefore, the appellant was deemed to have correctly availed the credit without the need for an ISD invoice.Issue 3: Verification of cenvat credit availed by appellantThe Tribunal scrutinized the documents submitted by the appellant, which clearly demonstrated that the service tax of Rs. 20,72,909 was paid in respect of all five units, with only Rs. 1,24,129 attributed to the appellant. Despite this evidence, both lower authorities failed to acknowledge this fact and dismissed the appellant's defense as an afterthought. The Tribunal criticized the authorities for not verifying the records and emphasized that there was no evidence to support the claim that the appellant availed the full cenvat credit amount. Consequently, the Tribunal ruled in favor of the appellant, allowing the credit of Rs. 1,24,129 and setting aside the demand for the remaining amount, along with associated interest and penalty.