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of <h1>Tribunal rules in favor of appellant on service tax credit distribution</h1> <h3>Ecof Industries (P.) Ltd. Versus Commissioner of Central Excise, Bangalore</h3> Ecof Industries (P.) Ltd. Versus Commissioner of Central Excise, Bangalore - [2009] 23 STT 381 (BANG. - CESTAT), 2010 (17) S.T.R. 515 (Tri. - Bang.) , ... Issues:- Distribution of service tax credit between different units of the same manufacturer/service provider.Analysis:The issue in this case revolves around the correct distribution of service tax credit between different units of the same manufacturer/service provider. The appellant distributed the credit of service tax in respect of their Malur Unit, even though the service tax had been paid in respect of services used by their Cuttack Unit. The appellant argued that the distribution of service tax credit was in compliance with Rule 7 of the CENVAT Credit Rules, 2004 and the master circular of service tax dated 23-8-2007. The appellant contended that there were only two conditions for distribution: the credit should not exceed the service tax paid, and it should not be in respect of exempted goods or services.The Department, on the other hand, supported the impugned order and referred to Rule 3 of the CENVAT Credit Rules, 2004, stating that service tax credit relating to one unit should not be distributed to another unit. However, the Tribunal noted that Rule 3 only allows credit for input services received by the manufacturer or provider of output services as a whole, without restricting it to a particular unit. The Tribunal also examined Rule 7, which allows the input service distributor to distribute CENVAT credit, subject to the conditions that the credit distribution does not exceed the service tax paid and is not attributable to exempted goods or services.The Tribunal highlighted that the rules and the clarificatory circular clearly specify only two restrictions on credit distribution. Since the impugned order sought to limit the distribution based on the units where services were used, which is not a restriction under the rules, the Tribunal concluded that such restriction cannot be upheld. The Tribunal emphasized that if the Department intends to impose such restrictions, the rule would need to be amended. Consequently, the Tribunal allowed all three appeals related to the same issue for different periods, finding in favor of the appellant.
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