1. The department has filed the above appeal against the order passed by the Commissioner who allowed the credit on input services.
2. The brief facts of the case are that the respondents who are engaged in manufacture of moulded phase circuit breakers were availing the facility of CENVAT credit on inputs, capital goods and input services. The department issued show cause notice proposing to deny CENVAT credit on certain input services which after adjudication culminated in passing of the impugned order wherein the Commissioner has allowed the credit. Aggrieved, the department is now before the Tribunal.
3. The Ld. AR Shri K.P. Muralidharan reiterated the grounds of appeal. He submitted that the respondents availed CENVAT credit of service tax amounting to Rs. 10,84,886.93 based on the Input Service Distributor (ISD) invoice dated 17.7.2008 for services like housekeeping, guesthouse, copy charges, cleaning charges, conference and that these services do not fall within the definition of input services. That an amount of Rs. 44,66,354/- is not eligible for credit since the respondent has not established that the services namely advertisement, C & F consultancy, repair and maintenance services etc. were used in or in relation to the manufacture of the final products. The respondents cannot avail credit since the input services were not used within the factory of the respondent. That the respondent has to establish the services on which credit taken based on ISD invoices are used in or in relation to the manufacture of final products in their unit at Chennai as required under Rule 2(1) and 3(1) of the CENVAT Credit Rules, 2004.
4. The Ld. Counsel Shri N. Viswanathan for the respondent supported the findings in the impugned order. He submitted that the respondent unit had registered as Input Service Distributor and the credit has been availed on the ISD invoices correctly. The services impugned in the appeal have been held to be eligible input services in various decisions of the Tribunal as well as High Court. That the services were used by the respondent in or in relation to the manufacture of the final products. He also submitted that the period involved is prior to 1.4.2011 when the definition of input had wide ambit as it included the phrase activities relating to business. That the impugned order does not call for any interference.
5. Heard both sides.
6. The main ground raised by the department is that the credit has been wrongly availed by the respondents on input as services were availed by other units of the respondent. When the respondent has taken ISD registration, we find no reason to deny the credit availed on such ISD invoices, though the services have been consumed in other unit of the respondent. The decision relied by the respondent in the case of Commissioner of Central Excise Vs. ECOF Industries Pvt. Ltd. 2011 (271) ELT 58 (Kar.) settles this issue. The relevant portion of the judgment is as follows:-
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 7. Para 2.3 of the Master Circular referred to by the Ld. Advocate reads as under:-
2.3 An Input service distributor is an office or establishment of a manufacturer of excisable goods or provider of taxable service. It receives tax 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.
10. Therefore, these are the only two limitations, which are imposed in Rule 7 preventing the manufacturer from utilizing the CENVAT credit, otherwise, he is entitled to the said credit. Merely because the input service tax is paid at a particular unit and the benefit is sought to be availed at another unit, the same is not prohibited under law. It is in this context, the manufacturer is expected to register himself as a input service distributor and thereafter, he is entitled to distribution of credit of such input in the manner prescribed under law. Therefore, the order passed by the tribunal is legal and valid and does not suffer from any legal infirmity and does not call for any interference and therefore it is dismissed.
7. In the case of Commissioner of Central Excise Vs. Godfrey Philips India Ld : 2009 (14) STR 375, the Tribunal has held as follows:-
4.2 The definition of the input service distributor clearly says that he is not merely a dealer. The input service distributor has to be a office of the manufacturer or producer of final products or provider of output service who will distribute the credit to his manufacturing units or service providing units as the case may be. The dealer buys the manufactured goods on which duties have been paid and passes on the actual duty paid by issue of an invoice. He does not take any responsibility as regards eligibility of Cenvat credit by his buyers. He may not even be aware as to whether buyer avails the Cenvat credit or not. He does not produce any input services which he is required to distribute among others. Whereas an input service distributor independently receives invoice and in fact he could be compared to a buyer of goods or service from the manufacturer or a output service provider. The concept of input service distributor has been introduced in view of the fact that definition of input service includes includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation up to the place of removal. The definition shows that many of services could be performed in places other than where the manufacturer or receiver of the service might have been located and quite often a single manufacturer may be having several branches and services can be received in several places.
8. The Tribunal in the case of United Phosphorus Ltd. Vs. Commissioner of Central Excise, Surat : 2013 (30) STR 509, has held as follows:-
6. In our considered view, the head office of the appellant, being a registered ISD is eligible to distribute service tax credit to any of their units/factory. On a specific query from the Bench, learned departmental representative informed that there was no proposal or proposition to issue show-cause notice to the input service distributor for wrong availment of Cenvat credit.
7. We find that the view or conclusion arrived at by the lower authority in denying the Cenvat credit is incorrect as there is no dispute of receipt of services. Our views also fortified by the decision of this Bench (supra) [2009 (239) E.L.T. 323 (Tri.-Ahmd.)] wherein this Bench had recorded the following findings:-
When we look at the functions of the input service distributor and the documents to be issued by him for passing on the credit, it becomes quite clear that the document issued by him for passing on the credit does not contain the nature of service provided and the details of services. It contains the service providers details, distributors details and the amount. Obviously the eligibility or otherwise of the service tax credit has to be examined at the end of input service distributor only. This is further supported by the fact that both Central Excise assessees and Service Tax assessees are under the regime of self-assessment and therefore it is the assessee himself who has to specify that the credit availed by him
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is admissible. Therefore the input service distributor cannot say that he is not required to prove the eligibility or otherwise of the service tax credit once at the receivers end which could be a branch or a factory of the distributor, no details would be available regarding the nature of service. Therefore the preliminary objection raised by the Ld. Advocate has to be rejected and it has to be held that it is the responsibility of the jurisdictional officer with whom input service distributor has registered to decide the dispute regarding eligibility or otherwise of the service tax credit that the input service distributor has taken and proposes to pass on to others. 9. Following the above decisions, we find no ground to interfere with the order passed by Commissioner. The impugned order is upheld and the appeal filed by the department is dismissed. (Operative portion of the order was pronounced in open court.)