Eligibility of credit availed by ISD on the strength of debit notes issued by service provider.

PJ/Case Law/2013-14/1972

Case:-UNITED PHOSPHORUS LTD. Versus COMMISSIONER OF C. EX., SURAT-II

Citation:-2013 (30) S.T.R. 487 (Tri. - Ahmd.)

Brief facts:-The relevant facts arising for consideration in this case is that the appellant has availed Cenvat credit to the tune of Rs. 13,26,001/- on service tax paid as per invoice issued by the Head Office. Their head office is registered as input service distributor. The lower authority felt that the amount of credit availed by the appellant is ineligible as head office has availed and service tax paid based upon photocopies of debit notes dated 12-10-2004 which did not contain name and address of the factory to whom the services have been provided and rate of Education Cess and also did not contain service tax Registration No. Coming to such conclusion, show-cause notice was issued to the appellant for denying credit of such an amount as ineligible Cenvat credit and interest thereof and also for imposition of penalties. The adjudicating authority after following due procedure of law confirmed the demand for Cenvat credit, demanded interest and imposed equivalent amount of penalty. The appellant preferred appeal before the First Appellate Authority, who also concurred with the view of the adjudicating authority.

As per the commissioner when this stay petition was called out, and after hearing both sides for some time on the stay petition, it was found that the appeal itself could be disposed of as it lied in a narrow compass, hence after allowing the application for waiver of pre-deposit, the appeal itself was taken up for disposal.

Appellant’s contention:-The ld. Counsel appearing on behalf of the appellant submitted that the issue in this case is already decided by the judicial pronouncement of this Bench in the case of Godfrey Philips India Ltd. [2009 (239)E.L.T.323 (Tri.-Ahmd.) = 2009 (14)S.T.R.375 (Tri.-Ahmd.)].It was his submission that the input service distributor i.e. their head office has subsequently produced the original debit note of service provider and those debit notes issued by the service provider clearly indicates that all the requirements of mentioning of service tax Registration No., rate of service tax and also to whom it was provided.

Respondent’s contention:-The respondent reiterated the findings of the lower authorities.

Reasoning of judgment:- On careful consideration of the submissions made by both sides it was found that the issue involved in this case is regarding denial of Cenvat credit on the invoices for transfer of Cenvat credit to the appellant on the basis of debit note which did not contain any detail as required under the statute. Debit notes which are annexed at pages 22, 23, 24 & 25 of the appeal memo were also pursued. The said debit notes had been issued by M/s. SSKI Corporate Finance Pvt. Ltd. M/s. SSKI has specifically indicated the rate of service tax paid by them, and service tax Registration No. in their invoice. It is also seen that M/s. SSKI has issued the invoices addressed to Head Office at Bombay of appellant. There is no dispute as to services rendered by SSKI to the appellant at Head Office.
Appellant’s head office has transferred the Cenvat credit of service tax paid by M/s. SSKI, as an input service distributor is also not disputed.
In 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.
They found 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 provider’s details, distributor’s 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 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 receiver’s 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.”

In view of the above, the service tax credit correctly availed by the input service distributor is eligible to be availed by the receiving unit.

Decision:- Pre-deposit waived and appeal allowed.

Comment:-The gist of this case is that if the credit is rightly admissible to head office and head office has taken registration as input service distributor than they can distribute the said credit to their branches. The debit notes are eligible as documents for availing service tax credit if they contain all the relevant particulars as prescribed under Rule 4A.

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PJ/Case Law/2013-14/1972

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