Input service credit remains available when documents match imports, but credit is limited to use in the recipient unit.

Credit on bank charges connected with imports was held not deniable merely because the invoice stood in the Hyderabad office name or because input service distributor procedure was not followed, where the documents were co-relatable with the Bills of Entry and substantive eligibility was otherwise shown. Credit was confined to inputs and related services actually used in the Gumpam unit; credit attributable to inputs stock transferred elsewhere, and construction service credit, was inadmissible. Extended limitation was upheld because the appellant had not correctly followed the procedure for clearance of inputs as such and had not disclosed all relevant facts during audit scrutiny. The matter was remanded for re-determination of eligible credit.

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Issues: (i) Whether credit of service tax paid on bank charges connected with imports could be denied merely because the debit advice or invoice stood in the name of the Hyderabad office and no input service distributor procedure was followed; (ii) whether credit was inadmissible to the extent the imported inputs on which credit had been taken were stock transferred to other units and not used in the Gumpam unit; (iii) whether invocation of the extended period was justified.

Issue (i): Whether credit of service tax paid on bank charges connected with imports could be denied merely because the debit advice or invoice stood in the name of the Hyderabad office and no input service distributor procedure was followed.

Analysis: The credit related to banking charges incurred for imports made in the name of the Gumpam unit. The documents issued by the bank contained the relevant particulars and were co-relatable with the Bills of Entry. On those facts, the Hyderabad office was not required to be treated as an input service distributor for this transaction, and the absence of an ISD mechanism did not justify denial of credit where substantive eligibility was otherwise established.

Conclusion: Credit on the bank charges was not liable to be denied merely on the ground that the documents stood in the Hyderabad office name or that ISD registration and distribution were not followed.

Issue (ii): Whether credit was inadmissible to the extent the imported inputs on which credit had been taken were stock transferred to other units and not used in the Gumpam unit.

Analysis: Credit is available only to the extent the input service is used in or in relation to manufacture by the recipient unit. Since a portion of the imported inputs was transferred out as such and the prescribed reversal mechanism was not followed, credit could not be retained for the portion not used in the Gumpam unit. The construction service credit was separately found to be ineligible. The matter required verification of the documents and re-determination of admissible credit on a unit-wise and use-based basis.

Conclusion: Credit was admissible only to the extent the inputs and related services were relatable to the Gumpam unit and actually used there; credit attributable to inputs not so used and the construction service credit was inadmissible.

Issue (iii): Whether invocation of the extended period was justified.

Analysis: The appellant had not correctly followed the procedure relating to clearance of inputs as such and had not placed all relevant facts before the Department during audit scrutiny. In those circumstances, suppression-type grounds were made out for extending the limitation period.

Conclusion: Invocation of the extended period was upheld.

Final Conclusion: The order was modified and the matter was remanded for re-determination of eligible credit, with the demand sustained for the clearly ineligible construction-service credit and the portion of credit not relatable to use in the Gumpam unit.

Ratio Decidendi: Documentary defects or absence of ISD procedure do not defeat credit where the input service is otherwise identifiable and co-relatable to the recipient unit, but credit remains confined to the extent the inputs or services are actually used in relation to manufacture by that unit.

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