2024 (3) TMI 751 - AT - Central Excise

CENVAT credit denial overturned as recovery from appellant improper when ISD entitlement unquestioned under Rule 7

M/s Nalco Water India Limited Versus Commissioner of CGST & Excise, Howrah

M/s Nalco Water India Limited Versus Commissioner of CGST & Excise, Howrah - TMI Issues Involved:1. Eligibility of CENVAT credit on input services distributed by Input Service Distributors (ISD).2. Jurisdiction of adjudicating authority to deny CENVAT credit.3. Compliance with Rule 7 and Rule 9 of the CENVAT Credit Rules, 2004.Summary:1. Eligibility of CENVAT Credit on Input Services Distributed by ISD: The appellant, engaged in the manufacture of water treatment chemicals, availed CENVAT credit on various input services distributed by their Head Office, registered as ISD under Rule 7 of the CENVAT Credit Rules, 2004. The dispute pertains to the period 2011-12 to June 2017, where the Revenue contended that the appellant availed ineligible CENVAT credit on services such as Man Power Supply, Technical Inspection Service, Management Consultancy, and others. The Tribunal noted that the Head Office, as ISD, distributed the input service credit to the appellant's manufacturing units proportionately, which is valid under Rule 9 of the CENVAT Credit Rules, 2004.2. Jurisdiction of Adjudicating Authority to Deny CENVAT Credit: The appellant argued that the eligibility of input services should be determined by the ISD, and the adjudicating authority does not have jurisdiction to deny the credit distributed by ISD. The Tribunal agreed, stating that if the Revenue wishes to deny the CENVAT credit, it should be addressed to the Head Office (ISD). Since no investigation was conducted at the ISD level, the credit cannot be denied to the appellant.3. Compliance with Rule 7 and Rule 9 of the CENVAT Credit Rules, 2004: The Tribunal emphasized that the distribution of credit by ISD is governed by Rule 7, which mandates that the credit should not exceed the amount of service tax paid and should not be distributed to units exclusively engaged in manufacturing exempted goods. The Tribunal cited previous judgments, including ECOF Industries Pvt. Ltd. and Nestle India Limited, supporting the appellant's stance that the credit distributed by ISD is valid even if the services were used in different units of the same company. The Tribunal concluded that the appellant correctly availed CENVAT credit based on ISD invoices, and the impugned orders denying the credit were set aside.Conclusion: The appeals were allowed with consequential relief, if any, as the Tribunal found no merit in the impugned orders denying CENVAT credit to the appellant.