2025 (6) TMI 1429 - AT - Central Excise

ISD challans are valid documents for CENVAT Credit under Rule 9(1) and Rule 4(A)(2)

M/s. Ultra Tech Cement Ltd. Versus Commissioner of Central Goods Service Tax & Bolpur

CESTAT Kolkata allowed the appeal regarding entitlement to CENVAT Credit based on Input Service Distributor challans. The Tribunal held that ISD challans ... Entitlement to avail CENVAT Credit on the basis of Input Service Distributor (ISD) challans that distribute credit for multiple input service invoices through a single challan - ISD challans are valid documents as per Rule 9(1) of the CENVAT Credit Rules, 2004 read with Rule 4(A)(2) of the Service Tax Rules, 1994 or not - HELD THAT:- The said issue had come up before this Tribunal in the appellant’s own case [2025 (2) TMI 1197 - CESTAT KOLKATA], wherein this Tribunal observed that 'We further take note on the fact the ISD Challan on the basis of which appellant has the credit having all the details for availment of Cenvat Credit. Further if at all there is a discrepancy in the invoice issued by the ISD, the proceedings were required to be initiated against the ISD first and thereafter to deny Cenvat Credit to the appellant. But, no proceedings have been initiated against the ISD distributor of the Cenvat Credit. In that circumstances, Cenvat Credit cannot be denied to the appellants.' Conclusion - As the issue has already been settled by this Tribunal in the appellant’s own case for another period, and it is an admitted fact that the appellant had availed CENVAT Credit on the basis of challans issued by the ISD and at the end of the ISD, distribution of CENVAT Credit to the appellant has not been disputed, in these circumstances, we hold that CENVAT Credit cannot be denied to the appellant. There are no merits in the impugned orders. The same are set aside by holding that the appellant has correctly availed CENVAT Credit on the basis of ISD challans issued by the ISD - appeal allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Tribunal in this matter are:Whether the appellant is entitled to avail CENVAT Credit on the basis of Input Service Distributor (ISD) challans that distribute credit for multiple input service invoices through a single challan, rather than issuing separate ISD challans for each input service invoice, as required under Rule 9(1) of the CENVAT Credit Rules, 2004 read with Rule 4(A)(2) of the Service Tax Rules, 1994.Whether the ISD challans issued by the appellant's ISD offices, which cumulatively distributed CENVAT Credit of service tax charged by various service providers under various invoices by preparing a general annexure rather than individual challans, are valid documents for availing CENVAT Credit.Whether denial of CENVAT Credit and imposition of penalties on the appellant were justified in the absence of proceedings initiated against the ISD offices that issued the challans.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity of ISD Challans Issued for Multiple Input Service InvoicesRelevant legal framework and precedents: The relevant provisions are Rule 9(1) of the CENVAT Credit Rules, 2004, which prescribes the documents required for availing CENVAT Credit, and Rule 4(A)(2) of the Service Tax Rules, 1994, which governs the issuance of invoices by ISDs. The Tribunal relied heavily on the precedent set in Art Infra Solutions Pvt. Ltd. v. CCE & ST, Lucknow, 2018 (363) ELT 1143, where it was held that there is no prescribed proforma for ISD invoices under Rule 4A(2) and that annexures to invoices are permissible to provide detailed information.Court's interpretation and reasoning: The Tribunal noted that the appellant's ISD offices issued a single challan to distribute credit relating to multiple input service invoices, supplemented by annexures containing the requisite details. The Tribunal observed that the adjudicating authority had failed to consider these annexures, which contained the necessary information as per Rule 4(A)(2). The Tribunal further emphasized that the law does not mandate a specific format for ISD invoices, and technical deficiencies cannot be grounds for denial of credit.Key evidence and findings: The appellant's ISD challans, along with annexures, contained all required details for distribution of credit. There was no dispute about the registration of the ISD offices or their compliance with filing returns. The Revenue did not initiate any proceedings against the ISD offices themselves.Application of law to facts: Applying the principles from the Art Infra Solutions case, the Tribunal held that the appellant was entitled to avail CENVAT Credit on the basis of the ISD challans issued, despite the method of issuing a single challan for multiple invoices. The absence of a prescribed invoice format under Rule 4(A)(2) allowed for annexures to be used to provide details.Treatment of competing arguments: The Revenue argued that the ISD challans were invalid as they did not comply with the requirement of issuing separate challans for each input service invoice. However, the Revenue also conceded that the issue had been settled in favour of the appellant in their own earlier case. The Tribunal gave precedence to the settled position and the absence of any proceedings against the ISD offices, which would have been the appropriate remedy if deficiencies existed.Conclusions: The Tribunal concluded that the appellant's method of issuing ISD challans was valid and that CENVAT Credit could not be denied on this ground.Issue 2: Denial of CENVAT Credit and Imposition of Penalties Without Proceedings Against ISDRelevant legal framework and precedents: The CENVAT Credit Rules and the principles of natural justice require that if there is any irregularity or violation by the ISD, proceedings should be initiated against the ISD before denying credit to the recipient units. The Tribunal reiterated the settled legal position that credit cannot be denied to recipients where no proceedings have been taken against the ISD distributor.Court's interpretation and reasoning: The Tribunal noted that no proceedings were initiated against the ISD offices that issued the challans. Since the appellant had availed credit based on these challans, and the ISD offices were registered and compliant, the denial of credit and penalties imposed on the appellant were not justified.Key evidence and findings: It was an admitted fact that the appellant had availed credit on the basis of ISD challans and that the ISD offices had distributed credit to the appellant. The Revenue did not dispute the registration or return filing status of the ISD offices.Application of law to facts: The Tribunal applied the principle that the proper course is to initiate proceedings against the ISD for any irregularity in the challans. Since no such proceedings were taken, denial of credit to the appellant was unwarranted.Treatment of competing arguments: The Revenue supported the impugned orders but agreed that the issue was settled in favour of the appellant. The Tribunal relied on this concession and the settled legal position to reject the Revenue's denial of credit and penalty imposition.Conclusions: The Tribunal held that no penalty was imposable on the appellant and that credit could not be denied in the absence of proceedings against the ISD.3. SIGNIFICANT HOLDINGSThe Tribunal made the following key determinations and legal pronouncements:'The short issue involved in the matter is that whether the appellant is eligible to avail Cenvat Credit on the basis of ISD challans where ISD distribute the credit of more than one common input services invoiced by issuing a single challan rather than issuing one challan for distributing credit for each common input service or not.''No specific Performa of the invoice have been notified or prescribed under Rule 4A(2) of S.T.R. but the requirement of the said Rule is that the invoice should contain the details as mentioned therein. Further, in view of the rulings of Superior Courts, Cenvat Credit cannot be denied on technical grounds.''If at all there is a discrepancy in the invoice issued by the ISD, the proceedings were required to be initiated against the ISD first and thereafter to deny Cenvat Credit to the appellant. But, no proceedings have been initiated against the ISD distributor of the Cenvat Credit. In that circumstances, Cenvat Credit cannot be denied to the appellants.''In view of this we do not find any merit in the impugned order. The same is set aside.'Core principles established include:CENVAT Credit can be availed on the basis of ISD challans that cumulatively distribute credit for multiple input service invoices, provided the challans and annexures contain the requisite details as per Rule 4(A)(2) of the Service Tax Rules, 1994.Technical non-compliance or format-related issues in ISD challans cannot be a ground for denial of credit if the essential details are available and the ISD is registered and compliant.Denial of credit and penalty imposition on the recipient without initiating proceedings against the ISD distributor is impermissible.The Tribunal's prior decisions on the same issue are binding and must be followed in subsequent periods involving the same facts.Final determinations:The appellant was entitled to avail CENVAT Credit on the basis of ISD challans issued, even if a single challan covered multiple input service invoices.The impugned orders denying credit and imposing penalties were set aside.The appeals were allowed with consequential relief.