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2019 (2) TMI 25 - AT - Service TaxTransfer of CENVAT Credit in an unauthorized manner - Input Service Distributor - Rule 3(4) of the CENVAT Credit Rules 2004 - Credit availed on the strength of improper documents - imposition of penalties. Held that:- The manner in which the Credit can be distributed among different units is prescribed under Rule 7 of CCR, 2004. During the relevant period, Rule 7 ibid stated that the Input Service Distributor may distribute the Credit to its manufacturing units or units providing output service subject to two conditions stated therein. The two conditions are: (i) The Credit distributed against a document referred to in Rule 9 does not exceed the amount of service tax paid thereon; and (ii) Credit of service tax attributable to service use in a unit exclusively engaged in manufacture of exempted goods or providing exempted services shall not be distributed - The Department has no case that these conditions have not been satisfied. The whole case is based on the allegation that the Credit which was distributed by M/s. Pricol Ltd., ISD, was re-transferred to it and later distributed to the other units. Rule 7 ibid was later amended vide Notification No. 18/2012 CE (NT) dated 17.03.3012 wherein a restriction for proportionate distribution was introduced - True, there may not be any specific provision to facilitate such “return” of non-required credit which has been transferred in the first place by the Input Service Distributor, but it has to be kept in mind that there would be situations when an Input Service Distributor may transfer Credit amounts inadvertently or in excess of what was intended, to a constituent unit. In such situations, the only recourse would be by way of “return/reversal” of such Credit back to the Input Service Distributor, which in turn can be facilitated only by the recipient unit reversing the unintended Credit and issuing a document confirming the facts of the same - There is no prohibition in law for such reversal of Credit to the Input Service Distributor. Thus, it is evident that M/s. Pricol Ltd., Plant-I has only returned/reversed the exact quantum of Credit that was transferred to it in the first place by the M/s. Pricol Ltd., ISD. Such return/reversal has not enlarged the quantum of Credit that has been availed nor has there been any financial injury caused to the exchequer. This is then only a revenue neutral situation - the demand or penalties cannot sustain - appeal allowed - decided in favor of appellant.
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