Input Service Credit: procedural lapse in ISD registration or distribution does not forfeit admissible Cenvat credit, subject to verification.

The text clarifies that where input service credit is otherwise admissible and documentary records allow verification, failure to obtain Input Service Distributor registration and non-distribution of common input service credit under the Cenvat regime constitute curable procedural lapses rather than forfeiture of entitlement; accordingly admissible Cenvat credit may be allowed subject to verification of records and eligibility and any consequential adjustments to revenue neutrality. The note treats the ISD registration requirement as procedural and confirms that post-registration or statutory transfer mechanisms can remedy the lapse without defeating substantive credit rights.

---

---

Issues: Whether mere non-obtaining of registration as an Input Service Distributor (ISD) and non-distribution of common input service credit under Rule 7 of the Cenvat Credit Rules, 2004 disentitles the assessee from availing Cenvat credit which is otherwise eligible.

Analysis: The Tribunal examined Rule 7 of the Cenvat Credit Rules, 2004 and Rule 3 of the Service Tax (Registration of Special Category of Persons) Rules, 2005, and considered precedent decisions addressing (i) whether Rule 7 originally imposed a pro rata distribution restriction and (ii) whether absence of ISD registration automatically disqualifies claiming of eligible input service credit. The Tribunal noted authorities holding that prior to later amendments Rule 7 did not impose the pro rata distribution restriction and that the requirement of ISD registration is procedural; where records are maintained and the alleged irregularity is procedural and verifiable by the revenue, the failure to obtain ISD registration is curable. The Tribunal also observed that subsequent statutory mechanisms (including post-GST single registration and transfer provisions) can render the failure revenue neutral where admissibility is not disputed.

Conclusion: Mere non-obtaining of ISD registration and non-distribution under Rule 7 does not disentitle the assessee from claiming eligible Cenvat credit; the appeal is allowed in favour of the assessee with consequential reliefs, subject to verification of records and eligibility.

Ratio Decidendi: Where input service credit is otherwise admissible and records permit verification, absence of ISD registration or failure to distribute under Rule 7 is a curable procedural lapse and does not forfeit entitlement to Cenvat credit.

---