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2019 (3) TMI 1046 - AT - Central ExciseCENVAT Credit - input service distribution - credit denied on the basis of invoices issued by input service distributor (ISD) who have been passing the credit of service tax paid on services which have no relation with the manufacture of soap - Held that:- The relevant statutory provisions are Rule 7 of CCR which prescribes the manner of dispute of credit by input service distributor and Rule 7A of CCR which talks about the recovery of cenvat credit wrongly taken or erroneously refunded. From Rule 7 and Rule 7A of CCR, it is clear that the input service distributor shall distribute the cenvat credit in respect of service tax paid on the input services to its manufacturing units provided the credit distributed does not exceed the amount of service tax paid and that the credit of service tax attributable to a particular unit shall be distributed only to that unit. The credit shall be allowed on the basis of invoice/ Bill/ challan issued by an office of premise of said provider of output service. The provisions makes it clear that the credit if distributed by ISD if is found ineligible credit, the same can be reversed by the ISD itself. If the reversal is prior utilisation of credit, no question of interest and penalty at all arises - In the present case, it is an acknowledged fact that out of the total proposed credit of ₹ 56,70,178/- the amount of ₹ 47,11,370/- has already been reversed and that all other demands have been dropped except for the demand of 1st SCN for reversal of credit of ₹ 44,33,290/-. It becomes clear that the amount reversed satisfy the demand even of SCN dated 15.01.2015 alleging the construction services to be ineligible input - thus Department was not justified for confirming the said demand. Demand of interest and penalty - Held that:- It is apparent from the record that entire credit was reversed even before the issuance of SCN. In view of Rule 14 of CCR as discussed above and even in view of Section 11AC of Central Excise Act, 1944, the question of demanding interest at the appropriate and the imposition of proportionate penalty does not also arises. Appeal allowed - decided in favor of appellant.
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