TaxTMI 
TaxTMI 
2023 (11) TMI 720
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.... input services in terms of Cenvat Credit Rules 2004 (CCR,2004). 2. On scrutiny of the ER-1 returns filed by appellant for the different periods, it was noticed by the department that the appellant had availed input service tax credit based on the ISD invoices issued by their Head office at Bangalore. The Head office at Bangalore has obtained registration as Input Service Distributor (ISD) for distribution of credit in terms of Rule 7 of CCR, 2004. 3. On verification, it appeared that the input service credit distributed through ISD invoices pertains to various services viz; advertising charges, business auxiliary services, commission charges, courier charges, consultancy fees, freight charges, insurance premium, IT software charges, maintenance charges, professional charges, recruitment charges, rental charges, telephone charges, training charges, warranty charges, etc., and these services according to department did not qualify as input services in terms of definition of 'input services' under Rule 2(l) of CCR, 2004. The department was of the view that input services on which credit was availed were not integrally connected with the manufacture of final product and did not ....
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....ead office is also registered as an 'Input Service Distributor' (ISD') for the purpose of distribution of credit availed on input services as per the Cenvat Credit Rules, 2004 (CCR). 6.2 The Manufacturing unit of the Appellant receives certain input services directly and takes credit of service tax paid on such input services. Apart from this, the Manufacturing unit also takes credit on the basis of ISD invoices issued by the corporate office. 6.3 In this background, Periodical Show Cause Notices were issued to the Manufacturing Unit in Puducherry, proposing to deny input services credit taken by the manufacturing unit on the basis of ISD invoices issued by the head office in Bengaluru alleging that the input services lack nexus to manufacturing activity, and that credit has been availed on service tax paid on common services consumed for trading also. 6.4 It is submitted that the Appellant denies all the allegations made by the Department. The eligibility of credit taken and distributed by the Input Service Distributor has to be decided by the formation having jurisdiction over the corporate office and not over the manufacturing unit of the Appellant situated ....
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....ce in this regard is placed on the decision of the Hon'ble Supreme Court in Canon India v Commissioner of Customs-2021 (376) E.L.T. 3 (S.C.). Therefore, the eligibility of credit distributed has to be determined at the end of the ISD distributor or else, it would lead to multiple proceedings initiated by different officers having jurisdiction over each recipient's unit. 6.9 The Service tax invoices and details of services received at Bengaluru would only be available with the corporate office and not with the manufacturing unit. The Manufacturing unit at Puducherry cannot be compelled to do the impossible act of justifying the eligibility of credit taken and the manner of distribution adopted by the corporate office in Bengaluru. The proper officer having jurisdiction over the corporate office/ ISD would be best suited to determine the eligibility of such credit as the necessary details would only be available with the corporate office. Therefore, requiring the recipient of distributed credit to prove the eligibility of credit taken by the distributor goes against the doctrine of impossibility (Lex non Cogit Ad impossibilia) which stipulates that law does not compel some....
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..... By this a legislative want as perceived by the executive branch, was sought to be remedied without legislative approval. Interpretation vests in the judicial branch and while the executive cannot be denied the prerogative to propose an interpretation, it must subordinate itself to judicial decisions The fastening of liability that flies in the face of decided interpretation is certainly beyond the pale of legality In Hansraj Gordhandas v. HH Dave, Asst Collector of Central Excise [AIR 1970 SC 755], the scope for interpretation has been restricted thus "It is an application of this principle that a statutory notification may not be extended so as to meet a casus omissus. As appears in the judgment of the Privy Council in Crawford Spooner "...we cannot and the Legislature & defective phrasing of the Act, we cannot add and mend, and by construction, make up deficiencies which are left there." But the operation of the notifications has to be judged not by the object which the rule making authority had in mind but by the words which it has employed to effectuate the legislative intent." 13. Furthermore even if the proposition in the circular were to....
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....gible credit and the utilization of pooled, distributed credit for discharge of tax liability which may thereby, be correctly described as short-paid The impugned proceedings have failed to take note of this gap and to apply itself to filling that gap. The consequence of short-payment, if any. is not enforceable in the light of this unfilled gap [Emphasis supplied] 6.13 In light of the above, the Ld. Counsel submitted that Impugned Orders lack jurisdiction in as much as it seeks to recover credit taken by the recipient manufacturing unit at Puducherry, based on invoices issued by the Input Service Distributor at Bengaluru. 7. Submission on Merits : - Without prejudice to the arguments advanced on the jurisdiction of the department to issue Show Cause Notice against the appellant manufacturing unit situated at Puducherry, alleging that the credit availed and distributed by the ISD (Head office) at Bengaluru is without jurisdiction, the Ld. Counsel put forward argument contending that the credit availed on the various input services is legal, proper and eligible. The Submissions on eligibility of input services are split into three parts as mentioned herein below: ....
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....ance is placed on the cases of Ramala Sahkari Chinni Mills Ltd. v. Commissioner of C.Ex, Meerut - 2010 (260) E.L.T 321 (S.C.). * The issue of applicability of the nexus test for determining eligibility of input services is no longer res integra in light of the decision of the Larger Bench of the Hon'ble Tribunal in Reliance Industries Ltd. v. Commr. Of C.Ex. & ST (LTU), Mumbai - 2022 (60) G.S.T.L. 442 (Tri.- LB). * Furthermore, during the disputed period, the definition of input services under Rule 2(l) of CCR contained the term 'activities in relation to business'. Therefore, the disputed services are eligible input services as per Rule 2(l) of the CCR. Further, the disputed input services have been allowed/not disputed in the subsequent period orders passed. * In light of the above, the Impugned Order merits to be set aside. E/41384/2013 The allegation is that the input services have no nexus with manufacturing activity and therefore can only relate to trading. As there was no nexus with manufacturing activity, it was held that the services are not input services in terms of Rule 2(l) of CCR. For this, the Impugned Order relies on the decisio....
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....ed to the Appellant. Therefore, the allegation that the disputed credit pertains to trading activity is without merits. [Annexure-5 at page no. 21 of Volume-1 to Typed set of Annexures to Appeal No. E/411/2012] B.3 In any case, it was held by the jurisdiction High Court in the case of Ruchika Global Interlinks v. CESTAT, Chennai - 2017 (5) G.S.T.L 225 (Mad.) that the formula prescribed under Rule 6(3) is applicable even for the period prior to 01.04.2011. Thereby, the credit cannot be denied in entirety under Rule 3 of CCR, 2004. The demand is raised under Rule 3 of the CCR and not under Rule 6 of the CCR. On this ground alone, the Impugned Order merits to be set aside. B.4 Without prejudice, even going by the workings relied by the Department while issuing the SCN, out of the total credit of Rs.7,93,09,911/- only Rs. 2,46,13,872/- pertains to trading activity. Therefore, a sum of Rs.5,44,68,961/- (excluding credit pertaining to other income) is available to the corporate office for distribution. Hence, the Impugned Order merits to be set aside on this account as well. (Annexure - II to SCN at pg. no. 215 of Volume-II to Typedset of Annexure to Appeal No. E/411/2012] 10. C....
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.... in Appeal Nos. E/41478, 41479/2015, E/42303/2015 & E/41662/2016.However, with respect to period pertaining to Appeal No. 41852/2017, the Appellant had taken credit on the said input service and the same was within the knowledge of the Department. However, out of the 19 services on which credit was taken, an SCN was issued only disputing 4 input services. Therefore, at the threshold itself, the Department had accepted that the service is an eligible input service and had not disputed the same. [Please refer to pg. 53 of Appeal No. E/41852/2017] Therefore, credit pertaining to Training services merits to be allowed. In any case, Coaching & Training services is one of the services mentioned expressly in the inclusive portion of the definition of input services under Rule 2(l) of CCR. 6 Courier services Held to be ineligible input service in Impugned Orders in Appeal Nos. E/41478, 41479/2015 & E/42303/2015. However, held to be eligible in subsequent period orders in Appeal Nos. E/41132, 41133, 41134/2016 & E/41662/2016. [Para No. 17.4 at Page No. 94 of Appeal No. E/41662/2016] 7 Credit Rating services Disputed in Impugned Order in Appeal No. E/41852/2017 and held to ....
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....15] 17 Rental charges Held to be ineligible input services in Impugned Orders in Appeal Nos. E/41478, 41479/2015 & E/42303/2015. However, held to be eligible in subsequent period orders in Appeal Nos. E/41132, 41133, 41134/2016 & E/41662/2016. [Para No. 17.11 at Page No. 99 of Appeal No. E/41662/2016] 18 Repairs and Maintenance services Disputed in Impugned Order in Appeal Nos. E/41132, 41133, 41134/2016 and held to be an eligible input service in the same order. [Para No. 17.14 at Page No. 94 of Appeal No. E/41132, 41133, 41134/2016] 19 Research charges Held to be ineligible input services in Impugned Order in Appeal Nos. E/41478, 41479/2015. However, held to be eligible in subsequent period orders in Appeal Nos. E/41132, 41133, 41134/2016 & E/41662/2016. [Para No. 17.15 at Page No. 105 of Appeal No. E/41662/2016] 20 Sales commission Held to be ineligible input services in Impugned Order in Appeal Nos. E/41478, 41479/2015 & E/42303/2015. However, held to be eligible in subsequent period orders in Appeal Nos. E/41132, 41133, 41134/2016 & E/41852/2017. [Para No. 18.5 at pg. no. 75 of Appeal No. E/41852/2017] 21 Sales promotion services....
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....ough credit was taken during the period in dispute in Appeal No. E/41852/2017. By not disputing the eligibility of the said service, the Department has accepted that the service is an eligible input service at the threshold itself. Therefore, credit ought to be allowed on the said input service. 4. Therefore, only the following two input services have been consistently disallowed by the Department and are presently under dispute: a. Housekeeping services b. Warranty/ AMC services. 11. Category 4: Credit availed on input services which have been disputed by the Department in all Appeals. [Appeal Nos. E/41478, 41479/2015, E/42303/2015, E/41132, 41133, 41134/2016, E/41662/2016, E/41852/2017] A. Housekeeping Services: [Para no. 11.17 at page no. 94 of Appeal Nos. E/41132, 41133, 41134/2016] A.1 It is submitted that housekeeping services are eligible input services under Rule 2(l) of the CCR and credit ought to be allowed on the same. Housekeeping services of both factory and office have been held to be an eligible input service. A.2 In the case of M/s. Indian Additives Limited v. Commissioner of GST and Central Excise, Chennai North Commissionerat....
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....as been distributed to the manufacturing unit. (v) Therefore, Warranty and AMC services provided by a common service provider (ASPs) are common input services for both the manufacturing unit and the corporate office and credit is proportionately distributed in the manner prescribed under Rule 7 of the CCR. 12. Hence it is prayed by the appellants that the demand confirmed vide the Impugned Orders may be set aside and Appeals may be allowed with consequential relief. 13.1 The Ld. Authorized Representative Shri. Rajaraman and Smt. Anandalakshmi Ganeshram appeared for the Department. The issue of jurisdiction was countered by the Ld. Authorized Representative, by adverting to Rule 14 of CCR,2004. The demand has been raised invoking Rule 14 of CCR, 2004 read with subsection (1)/proviso to subsection (1) of Section 11(A) of Central Excise Act, 1944. It is submitted that as per Rule 14 of CCR, 2004, the demand can be raised against the assessee who has wrongly taken and utilized the credit. The Bangalore Head office is not able to utilise the credit. It is the appellant -manufacturing unit situated at Puducherry which has utilized the in eligible credit for payment of duty....
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....igible input services in terms of definition of input service under Rule 2(I) of Cenvat Credit Rules, 2004 and hence the availment of Cenvat credit by appellant unit at Puducherry, was denied by the Commissioner of Central Excise, Puducherry. D. Rule 2(l) of CCR, 2004 defines input service as given below: Rule 2(l), CCR, 2004 (w.e.f. 01.04.2011). "Input service" means any service- (i) used by a provider of taxable service for providing an output service, or (ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal. and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, accounting, auditing, financing recruitment and quality control, coaching and training computer networking. credit rating, share registry, security, business exhibition, legal services, Inward transportation of inputs or ....
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.... Industries (P) Ltd Vs. CCE, Bangalore 2011-TIOL-770 HC KAR - ST) I. In the present case, the credit is taken on the services related to trading activity which are in no way connected to the manufacturing activity. The appellant had taken the cenvat credit on services pertaining to Trading activity and hence the quantum of input services attributable to trading activity has to be reversed. It is submitted that it is very clear from the provisions of CCR,2004 that the services relating to the trading activity are not eligible for Credit as trading is considered as an exempted service w.e.f. 01.04.2011. Prior to this date also as trading is neither service nor manufacture credit on services availed for trading is not admissible. Therefore, the availment of Cenvat Credit on the services pertaining to trading activity is not in order as per Rule 3 of CCR, 2004 and liable to be recovered. As the appellant had availed wrong credit by suppressing the fact with intention to evade payment of duty equal penalty was imposed for contravention of Rule 15(1) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. 13.3 It is submitted that the appeals may be dis....
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.... about the documents on which credit can be availed. The main contention of the appellant is that as the Head Office at Bangalore has availed credit and distributed the same to the appellant- manufacturing unit at Puducherry, the excise formation at Puducherry lacks jurisdiction to allege wrong availment of credit, issue notice of demand to disallow the credit or recover the same. In other words, it is argued that the Puducherry unit being the unit which has received the credit which was distributed by Bangalore unit, the eligibility of credit cannot be questioned at the end of recipient unit. 15.3 On perusal of the Show Cause Notice, it is seen that the provisions under Sec 11(A) along with Rule 14 have been invoked to raise the demand. Rule 14 of CCR 2004 reads as under:- "RULE 14. Recovery of CENVAT credit wrongly taken or erroneously refunded. - (1) (i) Where the CENVAT credit has been taken wrongly but not utilised, the same shall be recovered from the manufacturer or the provider of output service, as the case may be, and the provisions of section 11A of the Excise Act or section 73 of the Finance Act, 1994 (32 of 1994), as the case may be, shall....
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....) The role of input service distributor is totally different. Input service distributor is not dealer or Trader in services i.e. he does not buy and sell the services. Input service distributor receives the services for his own consumption, which may include his own office, his branch offices or various manufacturing units located in different places. Nature of services many a times are such that it may not be pertaining to particular manufacturing unit but may be pertaining to across the manufacturing unit or across various branch offices. In excise administration, excise duty is required to be paid by manufacturing unit wise. Thus, credit of input services is also required to be available to each manufacturing unit separately. Since the services may be across various offices or manufacturing unit, it is in order to sort out this difficulty of the trade, the concept of input service distributor was envisaged wherein a person having various manufacturing units or branch offices etc. would receive the invoices pertaining to services at one place i.e. offices and thereafter distribute the credit of service tax to various manufacturing units. Thus legally ISD as also its manufacturing....
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....dit availed on various input services has been disallowed by the Department. To analyse this issue the definition of 'input service' as it stood prior to 01.04.2011 and after this date requires to be understood. The definition after 01.04.2011 has already been reproduced. The period in these appeals involve the period before 01.04.2011 and also after such date. The credit availed on various input services prior to 01.04.2011 have been denied alleging that there is no nexus for input services with the manufacturing activity. Prior to 01.04.2011 all these services the definition of input services had a wide ambit as it contained the words 'activities relating to business'. So for the period prior to 01.04.2011 are availed for activities relating to the credit availed is eligible as these services are business of the manufacturer. For the period after 01.04.2011 it can be seen that in the appellant's own case the credit availed on all services, except Housekeeping services and AMC/warranty services have been allowed. The department having allowed the credit for certain period cannot deny credit for other subsequent/different periods. 17.1 It is submitted by the appellant that House....
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....alance of unavailed credit or undistributed credit lying in stock with the Bangalore unit. This being so, it cannot be alleged that the credit in respect of trading has been distributed. The Departmnet has not been able to explain as to how Rs.1,73,60558/- pertains to trading when the credit has been distributed to the appellant unit. It is settled law that it is not required that there should be one to one correlation for availment of credit or utilisation. The same would apply for distribution of credit by ISD also. This being so, the explanation put forward by appellant with their consistent plea is tenable and acceptable. 17.4 It would be beneficial to reproduce a copy of the ISD invoice/challan issued by Bangalore unit to Puducherry unit. 17.5 The certificate dated 24.10.2011 issued by Chartered Accountant auditor for the period 07/2011 to 09/2011 on the distribution of input tax credit also substantiates the contention of appellants that they have not distributed the ineligible credit on trading activity. 18. From the discussions above, we find that the denial of Cenvat Credit for different periods and the demand raised thereon cannot sustain. The issue on merits is ....
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....service tax credit 2. The following records, documents and books of accounts were produced to us by the Company for the purpose of our examination and verified by us. ⚫ Service Tax Bills (Output Liability) for the period from July-2011 to September-2011 ⚫ Service Tax Bills (Input Tax Credit) for the period from July-2011 to September-2011 ⚫ Service Tax returns in ST-3 from April-2010 to March-11 Audited Balance Sheet for the Financial Year 2010-11 3. On the basis of our examination so carried our and on the basis of the information and explanations given to us, we state that: a) The Company is registered with Service Tax Department vide Service Tax registration " CENTRALISED No.AACCA1237AST001 with Nature of Registration as REGISTRATION FOR MOR THAN ONE PREMSIES" having registered place of business in "Embassy Heights", 6th Floor, No.13, Magrath Road, Next to Hosmat Hospital, Bangalore-560 025. b) The Company has the following category of taxable services Manpower Recruitment Agency ⚫ Commercial Training & Coaching Maintenance or Repair Services • Information Technology Software Services Inp....