Distribution of service tax credit - corporate office

[pardeep bisht]

A company have a manufacturing unit as well as dealer also,the corporate office of the same is registered as input service distributer and distribute all the service tax credit to their manufacturing unit (either services related to manufacturing unit or dealer branch), the auditor has object that the corporate office only distribute that service tax credit which is related to manufacturing unit , please clear is its ok otherwise provide the related case law or circular if any

[Rama Krishana]

Can u avail the cenvat credit in the guise of Input Service Distributor (ISD) in relation to activities which are not chargeable to tax? The answer is no unless specifically provided (like rule 6(5)). Therefore the view of the Audit Party appears to be correct. But, if corrosponding reversal is made by the manufacturing unit, you can show to them and satisfy their query.

AI Summary

Input service distribution: ISD cannot allocate credit for non taxable activities without statutory support; reversal may remedy. An ISD may distribute only credits eligible under statute; credits attributable to non-taxable activities cannot be availed through the ISD except where a statutory exception permits it. The auditor's view that the corporate office should distribute only credit related to the manufacturing unit is consistent with this principle, and a corresponding reversal by the recipient unit can regularize any improper credit use.