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2016 (8) TMI 8 - CESTAT BANGALORE

2016 (8) TMI 8 - CESTAT BANGALORE - 2016 (46) S.T.R. 73 (Tri. - Bang.) - CENVAT credit - eligible input services - services received at the division / other office - input service distributor (ISD) - Held that:- there is no scope to have two views regarding the status of ILTD, Guntur, which is factually an integral part of ITC Ltd. In other words, ILTD, Guntur which is an input service distributor registered as such with the service tax wing of the Revenue in Guntur is nothing but ITC Ltd, who i .....

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registration dated 8.2.2006 issued by the Superintendent of Central Excise, Guntur, it is clearly mentioned that credit of input services is distributed or intended to be distributed to their manufacturing factories of ITC Ltd. at Bangalore (Karnataka), Saharanpur (Uttaranchal), Munger (Bihar). Consequently, Revenue s argument that input service distributor s operations are within the mischief of Rule 7(b) of CENVAT Credit Rules is without any foundation and is hereby rejected. - Credit all .....

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of ₹ 3,25,80,308/- was held as inadmissible and the demand of the said inadmissible CENVAT credit was confirmed along with interest, and equivalent penalty was also imposed. 2. The appellant has been represented by the learned Sr. Advocate, Shri K. S. Ravi Shankar, who has inter alia pleaded as below: * The appellant submits that the credit of service tax on all the input services in question was legitimately available and is admissible under the Cenvat Credit Rules, 2004 and would not be .....

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vision and the factory, the Ld. Lower authority was in grave error in treating the ILTD as a separate entity. This grave error vitiates the show-cause notice dated 3.2.2011 and the impugned order which has no legs to stand upon in law. * The Ld. Lower authority has grievously erred in not appreciating that the same legal entity (appellant) had been granted a registration as ISD under the Cenvat Credit Rules as evident from p.62 of the appeal petition which enumerated the name of the entity, its .....

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o grave error in denying credit and demanding cenvat credit/duty from the appellant. * The above contention is also supported by the decision of the Tribunal in Integral Construction Co.: (17) S.T.R. 380 (Tri.-Bang.) and Vihar Ahar, 32 STR 563 (Tri.-Ahmd.). The impugned order passed by the Respondent is without jurisdiction since the distribution of credit by the ISD has not been questioned, nor has their status as an eligible distributor of eligible credit subjected to dispute by the Guntur Com .....

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ve been questioned or denied, since procurement of inputs for manufacture of cigarettes is inevitable for manufacture of cigarettes on which duty is paid. The order is therefore wrong in law. * There is no evidence on record led by the Revenue to establish that the credits distributed relate to pre-threshing and separate activity done at the ILTD. The order is therefore based on specious theories and has no legal basis whatsoever, Assumptions and presumptions have run rife and conjectures and su .....

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in Leaf Tobacco Division in Guntur which distributed the credit and received invoices prescribed by Rule 4A of the Service Tax Rules, 1994 which were eligible for distribution. The Respondent has failed to take cognizance of Rule 2(m) and Rule 7 of the Cenvat Credit Rules which deal which definition of ISD and manner of distribution of credit. The entire proceedings are based on faulty perception of facts and law. In this connection, the appellant relies on the decision of the apex court in Goa .....

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e work. So as also the word godown was explained in para 14 ibid and the word warehouse in para 20. The Ld. Lower authority has brushed aside the above understanding in law of the word office. The order is therefore untenable. * The appellant also relies on the decision of the Bombay High Court in CST vs. Indokem Pvt. Ltd. [1975] 37 STC 432 (Bom.) in which the company s head office and branch office were both the same assessee and were not different legal entities in the eyes of law or two separ .....

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t of the same manufacturer. The intent of law having been made clear by the Government of contemporaneous explanation by the Board could not have been ignored by the Respondent. The order is therefore is untenable. 2.1 The appellant has also produced the following flow-chart saying that they are rightly eligible to claim CENVAT credit of the service tax paid on input services of their Indian Leaf Tobacco Division (ILTD) located at Guntur. 2.2 The learned advocate, Mr. K. S. Ravi Shankar has also .....

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Commissioner vs. ITC Ltd.: 2013 (295) E.L.T. A64 (S.C.) * Ugam Chand Bhandari vs. CCE, Madras: 2004 (167) E.L.T. 491 (S.C.) * Commissioner of Sales Tax vs. Indokem Pvt. Ltd. by Bombay High Court decision dated 7th December 1974 * Goa Urban Co-operative Bank Ltd. vs. Noor Mohd. Sheikh Mussa and Another: AIR 2004 SUPREME COURT 3886. 3. The Revenue has been represented by learned AR, Shri Parashiva Murthy, who has inter alia argued as follows: * Appellant is not eligible for the CENVAT Credit in r .....

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, Pune-I: 2013 (31) S.T.R. 667 (Tri.-Mumbai) 4. We have carefully considered the facts on record as well as the submissions of both the sides. 5. We find that for the identical facts, Revenue in two orders has dropped the proceedings against the appellant. One order in this regard has been passed by Additional Commissioner of Central Excise, Bangalore-II Commissionerate vide Order-in-Original No.49/2013 dated 29.11.2013 and another is passed by Commissioner of Central Excise (Appeals-I), Bangalo .....

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regarding the status of ILTD, Guntur, which is factually an integral part of ITC Ltd. In other words, ILTD, Guntur which is an input service distributor registered as such with the service tax wing of the Revenue in Guntur is nothing but ITC Ltd, who is the appellant only, for the purpose of enforcing laws of Central Excise and Service Tax. There have all the proofs been available on record giving clear conclusion that ILTD, Guntur is a part of ITC Ltd., who is the appellant claiming CENVAT Cre .....

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which receives invoices issued under Rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider, as the case may be . 5.2 The Revenue has argued that in the light of provisions of Rule 7B of CENVAT Credit Rules, 2004, input service distributor viz., ILTD, Guntur cannot legally distribute the CENV .....

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does not exceed the amount of service tax paid thereon; or (b) Credit of service tax attributable to service use in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed. 5.2.1 The Revenue s argument is that ILTD, Guntur is not paying either Central Excise duty or any service tax. In other words, Revenue s argument is that Input Service Distributor viz., ILTD, Guntur is not a Revenue paying entity and that is why it is covered unde .....

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r to find out if the operations being conducted by ILTD Guntur are within the mischief of Rule 7(b) of CENVAT Credit Rules , we have to find out whether ITC as a whole is exclusively engaged in the manufacture of exempted goods or providing exempted services . Here when the appellant, ITC is manufacturing excisable goods on which duty of excise is being paid, the operations of ILTD, Guntur do not come within the mischief of provisions of Rule 7(b) of CENVAT Credit Rules. It is on record that ILT .....

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ce distributor s operations are within the mischief of Rule 7(b) of CENVAT Credit Rules is without any foundation and is hereby rejected. Further the case laws quoted by the Revenue in support do not aid their stand. Consequently, the service tax paid for the input services by ILTD, Guntur and distributed as ISD (input service distributor) to the appellant is rightly admissible to the appellant. 5.3 Further, on this subject, we reproduce findings from the Additional Commissioner of Central Excis .....

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various units of ITC are specifically covered in the definition of input service as highlighted above. Therefore I find that there can be no bar in permitting credit on the input services being distributed by ILTD to various units of ITC as an Input Service Distributor. 5.3.1 On the same subject matter, the Commissioner of Central Excise (Appeals), Bangalore in its Order-in-Appeal No.44-45/2014-CE dated 31.1.2004 has also concluded as follows: 11. ...... In the instant case, the impugned servic .....

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stries Pvt. Ltd. (supra). The Hon ble Karnataka High Court in the said case inter alia observes as follows: 8. It is in this context, the definition of input service distributor makes it clear that a manufacturer or a producer of a final product or a provider of output service may have more than one unit and may be distributed in various parts of the country. It is in this background the definition of service distributor is defined as office of the manufacturer or producer of a final product or .....

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stered himself as a service provider and then, he would be able to collect all the input service tax paid in all its units and accumulate them at its head office and distribute the said credit to its various units. At the time of distribution, the manner of distribution is provided in Rule 7 which reads as under :- Manner of Rule 7. Distribution of credit by input service distributor. The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input s .....

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ut service distributor. Firstly, it cannot exceed the amount of service tax paid and secondly, the credit of service tax attributable to service used shall not be distributed in a unit exclusively engaged in the manufacture of exempted goods or providing of exempted services. 9. In fact, the Board has issued a circular clarifying in this regard, which is extracted by the tribunal at para 7 which reads as under :- Para 2.3 of the Master Circular referred to by the ld. Para 7. Advocate reads as un .....

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