TaxTMI 
TaxTMI 
2025 (2) TMI 949
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....on them as they were merely the recipients of distributed credit. 2. M/s Hindustan Coca-Cola Beverages Pvt Ltd, Raigarh, is registered as 'input service distributor (ISD)' and had taken the disputed credit for being passed on, under the authority of rule 7 of CENVAT Credit Rules, 2004, to several undertakings of theirs among which the appellant herein was one. 3. It is the contention of Learned Counsel for appellant that the demand cannot survive as they had merely topped up their accumulated credit from that assigned to them from the pool of the 'input service distributor' which they, then, utilized to discharge duties of central excise on goods manufactured by them. It was his contention that the incorrectness in availment, if any, could not be fastened on them as, in terms of rule 3 of CENVAT Credit Rules, 2004, they had not taken credit. He further contended that both the discharge of tax liability by the 'provider of service' and availment by the 'input service distributor (ISD)' was not in question and that the challenge was primarily linked to an aspect, viz., nexus between the service so procured and the activity undertaken by them, which was not within the ambit of rule ....
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....l in Clariant Chemicals (I) Ltd v. Commissioner of Central Excise, Raigad [2015-TIOL-2510-CESTAT-MUM], and final order [ no. A/86095-86096/2018 dated 20th April 2018 ] in Kansai Nerolac Paints Ltd v. Commissioner of GST, Mumbai Central, disposing off appeal [ ST/87792, 87798/2017 against order [ order-in-appeal no. PK/2&3/MC/2017 dated 31st July 2017 ] of Commissioner of Central Excise & CGST (Appeals-II), Mumbai. 5. The scheme of CENVAT credit envisages availment of duty paid on 'inputs', 'capital goods' and tax paid on 'input services' to be utilized as set off of duties/taxes due on goods under Central Excise Act, 1944 or on services under Finance Act, 1994. The scheme itself draws sustenance from the authority provided under the empowerment of Central Government to determine the manner in which duty libility was to be discharged. The scheme itself operates, not for, or under provisions in either statute but under the 'rule-making' power vested with the Central Government in both statues and the taking of credit is set out in the framework of rule 3 of CENVAT Credit Rules, 2004 therein as also the utilization. Such credit has to be taken only by a manufacturer or provider of se....
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....the present instance. It is this particular cross-connection that had led the Tribunal to consider the claim of CENVAT credit in context of the mechanism therein and, in particular, recovery to conclude that '14. The dispute is about the propriety of recovering credit from the person who, while, undoubtedly, entitled to utilize the distributed credit, was statutorily enabled to take the credit without having to ascertain the eligibility except in terms of validity of documentation which is legally silent on the provenance. We have already made clear the want of precedent value in the decisions that fastened the liability on the person who utilized such credit. In these circumstances, the nature and purpose of CENVAT credit offer perspectives of the context. 15. In our view, CENVAT credit is the bridge that reconciles the charging provision and the valuation provision of the taxing statute. In interpreting the various aspects - real, normal and transaction - of value that were subjected to duties before and after 1975 or after 2000, the Hon'ble Supreme Court has held that valuation, being only a measure of the levy, is not controlled by the charging provision and that legislativ....
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.... of clarity in pinpointing a recovery mechanism for distributed credit. 17. Notwithstanding the inapplicability of the decision in re Dilip Kumar & Company, the distillation of landmark decisions therein does provide us with enlightenment in guiding us on our present path. CENVAT Credit Rules, 2004 fails the prescriptions laid down by the Hon'ble Supreme Court in Govind Saran Ganga Saran v. Commissioner of Sales Tax [1985 Supp (SCC) 205] to qualify as a taxing statute. It is a framework for, as we have premised supra, neutralizing the surplus that would have accrued to the exchequer at the cost of business and the ultimate consumer. Guiding, as it does, the availment of credit, any deficit of legitimacy in availment thereof can be remedied only through machinery provisions of the respective taxing statute that an assessee is subject to. It is here that we arrive at the crux. 18. The assessee-appellant is statutorily acknowledged as a manufacturer covered by Central Excise Act, 1944 and any recovery can be effected only under section 11A of that Act. More so, the duty liability intended to be recovered must have been short-paid or not paid; no such allegation has been made in th....
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....rvice distributor' was unable to establish its claim to avail the credit of tax paid on the different services and, thereby, to deprive the utilization of such, the entity to be subject to recovery proceedings remains unidentified in the Rules. It would be a grave travesty to leave such identification to the adjudicating authority. Indeed, the different decisions highlight the inability of the several adjudicating authorities to arrive at a consensus. In this circumstance, there may have been no need to fill the gap. That many of the 'input services' so distributed, while amenable to arithmetical disaggregation, may actually have to be utilized to the entire extent even if 'exempt services' were not an activity is also to be reckoned with. An atomic scrutiny may carry with it the burden of administrative inconvenience and, hence, may have been deliberately obliviated. Notwithstanding all this, the wavering arrow of adjudicatory confirmation to fill the gap will have to be dislodged for that very reason.' in re Metro Shoes Pvt Ltd. Approaching the issue from another angle, the Tribunal in re Hindustan Coca Cola Beverages Pvt Ltd examined other decisions and held thus '4.3 From th....
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....ion, market research, storage up to the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation up to the place of removal". The definition shows that many of services could be performed in places other than where the manufacturer or receiver of the service might have been located and quite often a single manufacturer may be having several branches and services can be received in several places. 4.3 According to Rule 4A(2) of Service Tax Rules, 1994 every input services distributor distributing credit of taxable services is required to indicate the following details in the documents issued by him for distributing the credit viz. (i) the name, address and registration number of the person providing input services and the serial number and date of invoice, bill, or as the case may be, challan issued under sub-rule (1); (ii) the name and address of the said input services distributor; (iii) the name and address of the recipi....
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....e. According to Rule 7 of Cenvat Credit Rules, input service distributor may distribute the credit to its manufacturing units providing output service subject to following conditions, namely; the credit distributed against the documents referred to in Rule 9 does not exceed an amount of service tax paid thereof or; credit of service tax applicable to service used for unit exclusively engaged in the manufacture of exempted goods or providing of exempted services shall not be distributed. 5. Based on the definition given above and Rule 7 of the Cenvat Credit Rules, learned advocate submitted that the grounds taken in the show cause notice for denial of service tax are not at all valid since what was required to be seen by the Revenue in the unit which is receiving invoices from the ISD is whether, two conditions in the Rule 7 of Cenvat Credit Rules, 2004 have been fulfilled or not. In the absence of any allegation in the show cause notice indicating non-fulfilment of these conditions, no case can be said to have been made out. 6. We find considerable force in the arguments advanced by the learned counsel. It has not been alleged in the show cause notice nor there is finding that ....