Monday, May 6, 2013

Input service distributer may distribute credit of ST even if it has been paid prior to registration

There is no restriction under CENVAT Credit Rules with regard to period for availing CENVAT credit of service tax paid; hence, Input Service Distributor (‘ISD’) may distribute credit of service tax paid prior to its registration as ISD

The assessee had registered itself as ISD with effect from 04.10.2008. Thereafter, it had distributed the credit of service tax paid on common input service to its various units in respect of services received during the period February, 2008 to October, 2008. The department denied Cenvat credit on ground that the services were received prior to registration as ISD and the taxes were also paid on those services prior to that date.

The Tribunal held in favour of assessee as under:

1) There was no restriction under the CENVAT Credit Rules, 2004, with regard to the period for availing CENVAT credit of service tax paid. In other words, a manufacturer/input service provider could avail CENVAT credit of the service tax paid irrespective of any time limitation;

2) The only condition to be satisfied was that they should have paid the service tax prior to availing the credit. So long as this condition was satisfied, there was no time limit prescribed in the Rule within which the CENVAT credit had to be taken. If that be so, there was no reason why in the case of input service distributor alone, a restriction should be placed with respect to availment of CENVAT credit, i.e., input service distributor was permitted to distribute only taxes paid on or after registration. Such a restriction was totally unwarranted and was not provided for in the law;

3) Hence, credit was held validly distributed - Dagger Forst Tools Ltd. v. Commissioner of Central Excise [2013] 32 353 (Mumbai - CESTAT)

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