100% EOU Allowed Cenvat Credit on Input Services Without ISD Registration Under Rule 7 of CCR 2004

CESTAT Bangalore held that a 100% EOU operating two units under one license was entitled to cenvat credit on input services despite not registering as an Input Service Distributor under Rule 7 of the Cenvat Credit Rules, 2004. The tribunal found that input services were used in the manufacture of finished and semi-finished goods across both units, establishing sufficient nexus. Denial of credit solely due to non-registration was rejected, relying on HC precedent. Additionally, extended period of limitation was not applicable as there was no suppression of facts; returns were filed timely and transparently. The impugned order denying credit on input services was set aside and the appeals allowed.

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ISSUES:

Whether cenvat credit on input services can be denied on the ground that the services were not received in the manufacturing premises.Whether input services used in the manufacture of semi-finished goods at one unit have nexus with the manufacture of final products at another unit under a single licence.Whether non-registration as an Input Service Distributor under Rule 7 of the Cenvat Credit Rules, 2004, is a valid ground for denial of cenvat credit on input services.Whether cenvat credit on input services can be denied by invoking the extended period of limitation in the absence of suppression of facts.

RULINGS / HOLDINGS:

The Court held that "to qualify as an input service, it is not necessary that these services should be received in the manufacturing premises," and therefore credit cannot be denied on that ground.The Court found that input services utilized in the manufacture of semi-finished goods at one unit have a sufficient nexus with the manufacture of the final product at another unit under the same licence, and credit on such input services is admissible.The Court ruled that "only for the reason of non-registration under the relevant Rules, credit cannot be denied," citing that no statutory provision mandates registration as a condition precedent for claiming cenvat credit under Rule 7 of the Cenvat Credit Rules, 2004.The Court held that invoking the extended period of limitation for demanding cenvat credit on input services cannot be sustained where "no fact was suppressed from the Department" and refund applications were filed timely.

RATIONALE:

The Court applied the statutory framework of the Cenvat Credit Rules, 2004, particularly Rule 7 concerning Input Service Distributors, and relevant case law precedents including mPortal India Wireless Solutions P. Ltd. v. CST, Bangalore.The Court emphasized a purposive interpretation of "input services" and nexus requirements, rejecting a narrow view that limits credit only to services received physically within manufacturing premises.The Court relied on authoritative precedents from the Karnataka High Court and Gujarat High Court, which held that registration as an Input Service Distributor is not a mandatory condition for availing cenvat credit, reflecting a doctrinal position against procedural technicalities overriding substantive credit rights.The decision reaffirmed that extended period of limitation under excise law requires suppression of facts, which was absent here, thereby protecting the appellant's right to claim credit within normal limitation periods.

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