CA K. Jitendra Babu

M/S National Engineering Industries Ltd Vs. Vs Commissioner Of Central Excise (CESTAT Jaipur), Appeal No. E/1371/2011­EX(DB), Final Order No. 52267/2015­EX(DB), , Date of Decision: 15.7.2015

Customs, Excise and Service Tax Appellate Tribunal Jaipur has ruled in the case of National Engineering Industries Ltd. Vs. Commissioner of Central Excise that CENVAT credit cannot be denied for non-registration of head office as Input Service Distributor (ISD), since omission to obtain registration as an ISD can at best be considered as procedural irregularity which cannot stand in the way of allowing substantial benefit of CENVAT credit, so long as there is no dispute regarding availment of services by the appellant company, issue of invoices by the service provider and the services are eligible input services as per CENVAT credit rules. The Tribunal followed the decisions in the case of Demosha Chemicals Pvt. Ltd., Vs. CCE Daman – 2014 (34) STR 758 (Tri) and Doshion Ltd. Vs. CCE Ahemdabad – 2013 (288) ELT 291 and held that appellant cannot be denied CENVAT credit availed by them in the absence of registration as input service distributor by the Head office.

Facts of the case are discussed hereunder briefly:

The appellant is a manufacturer of Ball Bearing and having three units at Jaipur, Manesar and Newai. They are having their central Head Office at Jaipur. The appellant availed CENVAT Credit on certain services like Selling Commission, Royalty, Consultancy & Professional, Banking Charges, Audit Fee, AMC Charges, etc. on which service tax was paid and invoices were raised in the name of the Head Office. The
Jaipur unit of the appellant has taken Cenvat Credit on all these services. The case of the Revenue is that as their head office is not registered as input service distributor, therefore, Jaipur unit is not entitled to take Cenvat Credit on these services. It is also in the case of Revenue that services in question have not been only utilized by Jaipur unit. Therefore, 100 % credit is not entitled for Jaipur unit. Department had issued show-cause notices for the period February 2006 to March 2009 proposing denial of CENVAT credit to the Jaipur unit.

As usual, the show cause notices were adjudicated against the appellant and Cenvat Credit was denied. Penalty was also levied on the appellant. Aggrieved by the orders, the appellant approached the Tribunal.

The Tribunal granted relief to the appellant by holding that CENVAT credit cannot be denied for procedural irregularities when substantial conditions are fulfilled.

The above case shows how our tax administrators deny benefits available to the assesses for procedural irregularities, even though the services are utilised by the assessee and therefore eligible for CENVAT credit. This type of attitude creates an impression in the minds of the assessees that injustice is being handed out by the department to them and highlights the indifferent attitude of the tax department towards assesses. Trade and Industry expects department to pro-actively support them in availing benefits due to them and at the same time take strenuous action against tax evaders. CBEC should actively and regularly review such decisions of the Tribunal which are based purely on procedural matters and issue instructions to the field formations to ensure that due benefits are allowed to the assesses, without wasting their time, energy and money in filing and pursuing appeals before the higher forums. That will help in promoting “Ease of Doing Business” in India.

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