Case Law Details
Kansai Nerolac Paints Ltd. Vs Commissioner of GST, Mumbai Central (CESTAT Mumbai)
In this case demand was raised from the input service distributor who has distributed the service credit to their respective factory on the ground that the input service viz. air travel agent service, is not admissible as the service related to business activity shall exclude on the definition of input service with effect from 1.4.2011.
I find that Rule 14 applies to the person who avails credit wrongly which is recoverable. In the present case, the appellant has not availed the credit whereas they have distributed the input service credit to their respective manufacturing unit who, in turn, availed the credit.
If at all credit has to be denied, it can be denied at the end of such manufacturing unit which has availed the cenvat credit. Input service distributor does not fall under Rule 14 of the Cenvat Credit Rules as they neither avail the cenvat credit nor utilize the same for payment of any service tax/excise duty. Therefore, the denial of cenvat credit and recovery thereof under Rule 14 against the input service distributor is without authority of law. On this count itself, the demand is not sustainable.
This issue has been considered by the Division Bench of this Tribunal in the case of Mahindra and Mahindra Ltd. (supra) wherein the Bench has taken a view that input service distributor has only distributed the input service credit. Rule 14 of the Cenvat Credit Rules can be made applicable only on the person who avails the cenvat credit wrongly or utilizes the same. Show cause notice cannot be issued to the appellant who is an input service distributor for recovery of cenvat credit. Following the ratio of the said decision, the demand in the present case is not sustainable.
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