Input Service Distributor registration curable procedural defect; credit denial reversed where records prove entitlement and no apportionment required.

Denial of cenvat credit for non-registration of a zonal office as an input service distributor is treated as a curable procedural irregularity where invoices and payment records establish substantive entitlement to credit; accordingly credit cannot be denied on that ground. Requirement of apportionment under Rule 6 was not sustainable because the show cause notice failed to identify or substantiate any exempted services, so reversal on apportionment grounds was unwarranted. Consequential demands of interest, penalties and invocation of the extended limitation period were unsustainable in the absence of evidence of deliberate evasion or malafide conduct; the impugned order was set aside.

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Issues: Whether denial and recovery of cenvat credit on the grounds that (i) the zonal office was not registered as an input service distributor and (ii) the appellant rendered both exempted and taxable services without applying Rule 6 apportionment, and consequential demand of interest and penalties, are sustainable.

Analysis: The appeal record shows undisputed payment of service tax on the input services and that invoices with requisite details were available; the zonal office and the appellant main branch shared premises and financial responsibility and the zonal office had no separate financial transactions. Precedent of the jurisdictional High Court and other courts treats non-registration of an input service distributor as a curable procedural irregularity where complete records exist and the substantive entitlement to credit is otherwise established. The show cause notice did not identify or substantiate specific exempted services; the departmental orders proceeded on findings beyond the scope of the notice and conflated exclusion from taxable value with exemption from levy. There is no evidence of deliberate evasion or malafide conduct warranting invocation of extended limitation or imposition of penalties under the statute.

Conclusion: Denial and recovery of the cenvat credit on account of non-registration of the zonal office as an input service distributor is unsustainable; calls for apportionment or reversal under Rule 6 are unsustainable in the absence of any substantiated claim of exempted services; consequential demands of interest and penalties and invocation of extended period are unsustainable. The impugned order is set aside and the appeal is allowed.

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