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DISTRIBUTION OF CREDIT BY INPUT SERVICE DISTRIBUTOR- (PART-2) - CBEC Clarifications

Central Excise - By: - Dr. Sanjiv Agarwal - Dated:- 23-7-2015 Last Replied Date:- 30-7-2015 - Input service distributor can distribute Cenvat Credit of Service Tax on input services as per Rule 7 of Cenvat Credit Rules. Rule 7 provides for the mechanism of distribution of common input service credit by the Input Service Distributor to its manufacturing units or to units providing output services. An amendment was carried out vide Notification no. 05/2014-CE (N.T.) dated 24th February, 2014, amen .....

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ify on the manner and extent of distribution of common input service credit in terms of amended rule 7(d) and use of words, 'such unit', there are doubts that due to the use of the term such unit , the distribution of the credit would be restricted to only those units where the services are used. There is also a doubt that in view of the amended rule 7(d) of the CCR, the credit available for distribution would get reduced by the proportion of the turnover of those units where the service .....

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The credit of input service pertaining to more than one unit shall be distributed as follows: Distribution to A = X/Y * Z X = Turnover of unit A during the relevant period Y = Total turnover of all its unit i.e. A + B + C + D during the relevant period Z = Total credit of service tax attributable to services used by more than one unit Similarly the credit shall be distributed to the other units B , C and D . Illustration: An ISD has a common input service credit of ₹ 12000 pertaining to mo .....

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ribution to 'A' = 12000 * 2500000 / 10000000 = 3000 (ii) Distribution to B = 12000 * 3000000/10000000 = 3600 (iii) Distribution to C = 12000 * 1500000/10000000 = 1800 (iv) Distribution to D = 12000 * 3000000/10000000 = 3600 The distribution for the purpose of Rule 7(d), will be done in this ratio in all cases, irrespective of whether such common input services were used in all the units or in some of the units. In Hindustan Zinc Ltd. v. CC&CE, Jaipur- II (2013) 2012 (3) TMI 367 - CES .....

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ad Office as input service distributor, it was held that substantial benefit, if otherwise available, could not be denied on technical and procedural grounds. [Also see: Sanghi Industries Ltd. v. CCE, Rajkot 2014 (2) TMI 278 - CESTAT AHMEDABAD; BSNL v. CCE, Salem (2013 (12) TMI 742 - CESTAT CHENNAI)]. In Elder Pharmaceuticals Ltd v. CCE, Belapur 2014 (9) TMI 804 - CESTAT MUMBAI it was held that Commissioner having jurisdiction of units receiving input service credit was not competent to adjudica .....

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iled thereafter. Service Tax was paid on input services and distributed by the Input Service Distributor in terms of facility extended to the manufacturer of the excisable goods under the provisions of Cenvat Credit Rules. It was held that Cenvat credit of service tax paid by various ISDs on input services used in or in relation to manufacture of crude oil/natural gas was not available to assessee as crude oil/natural gas was exempted. Words duty of excise referred in the definition of exempted .....

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paid on input services could not be distributed. In Market Creators Ltd v. CCE & ST, Vadodara (2014 (7) TMI 704 - CESTAT AHMEDABAD), where Service Tax was not paid by rented premises as Head Office for all the branches and Service Tax registration is also not taken by assessee of such premises and issued credit taking document, it was held that assessee could not take credit of documents issued by a premises, which was not registered as an input service distributor under the Service Tax prov .....

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bout the maintenance of any register in a prescribed format. However, they have to maintain adequate records showing the relevant details such as receipt, disposal, consumption and inventory of inputs and capital goods, the amount of credit taken, utilization of the credit amount etc. Rule 7 allows distribution of CENVAT Credit w.e.f. 1.4.2007 in respect of service tax paid on inputs by an input service distributor. Rule 7A has been inserted to provide that an output service provider can take cr .....

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addressed to the corporate office, credit can be availed by the factory. Now, by virtue of Rule 7A, the other office can issue an invoice and CENVAT Credit could be claimed. W.e.f. 1.4.2008, a new rule 7A has been inserted in CENVAT Credit Rules, 2004 which allows distribution of credit of input goods by the office of service providers to take care of situations where bills of inputs and capital goods are received at one office (say, head office) but services are actually provided from some othe .....

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