2026-VIL-1877-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax - Denial of CENVAT credit on common input services - Rule 14 of the CCR, 2004 - Appellant, a manufacturer with three manufacturing units, availed CENVAT credit on common input services at one unit, which was also its registered office - Department alleged that the credit attributable to the other two units ought to have been distributed through the Input Service Distributor mechanism and confirmed the demand with interest and penalty - Appellant had already reversed the credit attributable to the other units along with interest and had informed the Department - Whether the Appellant was entitled to avail CENVAT credit on common input services at a unit not registered as an ISD - HELD - There was no finding that the services were not received, that service tax was not discharged by the service providers or that credit was availed in excess of the tax paid. The dispute concerned only the manner of accounting for and distribution of credit amongst the units of the same legal entity and not the substantive eligibility of the credit. Rule 7 of the CCR, 2004, as it stood during the relevant period, did not restrict the quantum of credit that could be distributed. The requirement of proportionate distribution was introduced subsequently and cannot be applied retrospectively to the earlier period. Absence of Input Service Distributor registration is a procedural irregularity and cannot convert genuine and admissible credit into inadmissible credit where the services were received, the credit was supported by documents and no excess or double benefit was established. The reversal made without prejudice to the Appellant's contention is not an admission of liability - The demand confirmed by the lower authorities is set aside – The appeal is allowed - Extended period of limitation - Section 11A of the Central Excise Act, 1944 - SCN was issued after the normal period of one year and the extended period was invoked on the allegation that the Appellant failed to disclose availment of common input service credit at that unit - Appellant contended that the credit was reflected in its records and that its accounts were audited by the Department earlier - Whether the extended period of limitation and the penalty under Rule 15(2) of the CCR, 2004 read with Section 11AC of the CEA, 1944 are sustainable - HELD - The credit was reflected in the Appellant's records and supported by invoices. Where the relevant records were available to the Department, the Revenue must establish the particular material fact which was deliberately withheld or suppressed. There was no allegation of fabricated invoices, parallel records or concealment of receipt of services. The reversal of credit had been intimated to the Department before issuance of the SCN. Mere omission or wrong availment does not by itself amount to suppression, and deliberate suppression, wilful misstatement or intent to evade was not established. The extended period was therefore not invocable and the entire demand is barred by limitation - The demand, consequential interest and penalty are set aside.
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