TMI Blog2018 (1) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... or Appellant Shri Ajay Kumar, Addl. Commr. (A.R) for respondent ORDER Per : Ramesh Nair The fact of the case is that the appellant have availed cenvat credit on the strength of ISD invoices issued by input service distributor that is the head office of the appellant in respect of certain invoices such as Commission Brokerage, Clearing Forwarding, Courier, Hotel Accommodation, Maintenance and Repair, Technical Testing Analysis Inspection, Telephones, Security Detective Agency, Market Research Agency, Consulting Engineer, Car Hire Charges, Annual Custody Fees, Travel Agency, Manpower Recruitment Agency, Credit Cards, Pandal Decorators Management Consultants Artwork and Designing others. The adjudicating authority disallowed the cenvat credit availed on the basis of input service distributors invoice on the ground that the input service distributor as well as the appellant have not maintained proper grounds of services availed so as to show the particulars of services availed by or on behalf of the appellants Tarapur Unit while distributing the above service tax meant for credit under cenvat credit amount. He further contended that the entire credit was di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the invoices issued by their head office who is input service distributor. The provision for description of input service credit is provided under Rule 7 of the Cenvat Credit Rules, 2004. We reproduced the Rule 7 prevailing prior to 1.4.2012 and after 1.4.2012 as under: Rule 7. Manner of distribution of credit by input service distributor. - 7. The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following condition, namely:- (a) the credit distributed against a document referred to in rule 9 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. From the plain reading of the Rule prevailing prior to 1.4.2012 it can be seen that for distributing the input service credit only two conditions were required. The credit distributed should not exceed the amount of service tax paid and credit of service should not be exclusively used for exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax paid invoices/bills of input services procured (on which Cenvat credits can be taken) and distributes such credits to its units providing taxable services or manufacturing excisable goods. The distribution of credit is subject to the conditions that, - (a) the credit distributed against an eligible document shall not exceed the amount of service tax paid thereon, and (b) credit of service tax attributable to services used in a unit either exclusively manufacturing exempted goods or exclusively providing exempted services shall not be distributed. An input service distributor is required (under Section 69 of the Act, read with Notification No. 26/2005-S.T.) to take a separate registration. 8. The combined reading of the Rule 7 and the clarificatory Circular dated 23-8-2007 clearly shows that there are only two restrictions regarding the distribution of the credit. The first restriction is that the credit should not exceed the amount of Service Tax paid. The second restriction is that the credit should not be attributable to services used in manufacture of exempted goods or providing of exempted services. There are no other restrictions under the rules. The restrictions so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The similar view was taken by this Tribunal in the case of India Cements Ltd. (supra) wherein this Tribunal has held as under: 6. We do not find any answer as to the reason why the appellant was not given opportunity of defence through show cause notice to defend on the concept of an office dealt with in adjudication. More specifically, that is dealt with in para 7 thereof. This ground alone is enough to strike down the adjudication order on the ground of violation of natural justice. 7. No doubt, the definition of input service distributor using the term an office is applicable to the appellant, but the term an office cannot be limited to a physical boundary but shall be interpreted as different boundaries which are offices and distribute the credit. The requirement is that credit distributing agency should be an office only but not a confined boundary. The reason is probably an office maintains record to verify the credit distributed. 8. The term an office used in Rule 2(m) of Cenvat Credit Rules, 2004 is to be read in plurality in the context in which that is used and any narrow meaning given to the term an office would defeat the spirit of the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucer or provider, as the case may be. 9. Rule 7 pertains to manner of distribution of credit by input service distributer. At the relevant time, this Rule 7 permitted input service distributor to distribute Cenvat Credit in respect of service tax paid on the input service to its manufacturing units or units providing output service, subject to the two conditions, viz :- (a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon; (b) credit of service tax attributable to service [used by one or more units] exclusively engaged in manufacture of exempted goods or providing of exempted service shall not be distributed. 10. It was only later on that additional condition by way of Clause (d) of Rule 7 was added, which reads as under :- credit of service tax attributable to service used by more than one unit shall be distributed pro rata on the basis of the turnover of such units during the relevant period to the total turnover of all its units, which are operational in the current year, during the said relevant period. 11. The objection of the department therefore that the credit from o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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