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Input Service Distributor need not be a ‘manufacturer’ or ‘output service provider’ for availing Cenvat credit

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Court :
Hon’ble CESTAT, New Delhi

Brief :
The Hon’ble CESTAT, Delhi after analysing Rule 2(m) and Rule 7 of the Credit Rules held that: - In the light of Rule 7 of the Credit Rules which provides the manner of distribution of Cenvat credit by ISD, the basic requisite condition for the distribution of the said credit is that the ISD receives the invoices towards purchase of input services and pays the Service tax. There is nothing in the said Rule to suggest that the Head Office or the office of the manufacturer should be himself in a position to provide any output service or to manufacture any excisable goods

Citation :
Moser Baer India Ltd. Vs. Commissioner of Central Excise, Noida [2015 (1) TMI 1093 - CESTAT NEW DELHI]

 Dear Professional Colleague,

Input Service Distributor need not be a ‘manufacturer’ or ‘output service provider’ for availing Cenvat credit

We are sharing with you an important judgment of Hon’ble CESTAT, New Delhi, in the case of Moser Baer India Ltd. Vs. Commissioner of Central Excise, Noida [2015 (1) TMI 1093 - CESTAT NEW DELHI] on the following issue:

Issue:

Whether Input Service Distributor must be a ‘manufacturer’ or ‘output service provider’ for availing Cenvat credit?

Facts & background:

Moser Baer India Ltd. (“the Appellant”) is the manufacturer of CDR, CD Rom, DVDR and DVD Rom, falling under Chapter Heading 85 of the Central Excise Tariff Act, 1985, at their factory situated at Noida. The Head Office of the Appellant, located at Okhla, Delhi is registered as an Input Service Distributer (“ISD”) in terms of Rule 2(m) of the Cenvat Credit Rules, 2004 (“the Credit Rules”). The Head Office was discharging Service tax liability under Reverse Charge for the various services received by them from foreign country. The Service tax so paid by them was distributed by the Head Office to the Appellant’s factory at Noida, which was utilized by the Appellant in their factory located at Noida.

The Department contended that in as much as the Service tax was being paid by the Head Office, which was neither engaged in the manufacture of any excisable goods nor providing any output services, they were not entitled to avail the said credit and in turn not entitled to pass on the said credit to the Appellant’s factory located at Noida.

Being aggrieved, the Appellant preferred an appeal before the Hon’ble CESTAT, Delhi.

Held:

The Hon’ble CESTAT, Delhi after analysing Rule 2(m) and Rule 7 of the Credit Rules held that:

- In the light of Rule 7 of the Credit Rules which provides the manner of distribution of Cenvat credit by ISD, the basic requisite condition for the distribution of the said credit is that the ISD receives the invoices towards purchase of input services and pays the Service tax. There is nothing in the said Rule to suggest that the Head Office or the office of the manufacturer should be himself in a position to provide any output service or to manufacture any excisable goods;

- Further, Cenvat credit on the input services is not dependent upon the actual receipt of the services in the factory unlike the Cenvat credit of the duty paid on the inputs, which is dependent upon the actual receipt of the inputs or the capital goods in the factory. As such, when the services were first received by the Head Office and then transferred to the factory for further utilization, it cannot be made a ground for denial of Cenvat credit;

- The Tribunal in number of cases has held that where the documents are in the name of Head Office, Cenvat credit can be availed in the factory belonging to the same manufacturer - Modern Petrofils Vs. CCE, Vadodara [2010 (20) S.T.R. 627 (Tri. - Ahmd.)] and CCE, Vapi Vs. DNH Spinners [2009 (244) E.L.T. 65 (Tri. - Ahmd.)].

Therefore, the Hon’ble Tribunal allowed the Cenvat credit to the Appellant transferred from their Head Office.

Hope the information will assist you in your Professional endeavors. In case of any query/ information, please do not hesitate to write back to us.

Thanks & Best Regards,

Bimal Jain                   

FCA, FCS, LLB, B.Com (Hons)
Delhi:
Flat No. 34B, Ground Floor, Pocket - 1,
Mayur Vihar, Phase - I,
Delhi – 110091, India
Email: bimaljain@hotmail.com
Web: www.a2ztaxcorp.com

Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the authors nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this document nor for any actions taken in reliance thereon.

Readers are advised to consult the professional for understanding applicability of this newsletter in the respective scenarios. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. No part of this document should be distributed or copied (except for personal, non-commercial use) without our written permission. 

 

Bimal Jain
on 05 February 2015
Published in Service Tax
Views : 2129
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