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Since detailed records were maintained, even though assessee failed
to take registration as input service distributor, utilisation of CENVAT
credit by one unit for discharging liability of another unit located in
the same place was allowed.
Facts
Assessee, having five
manufacturing units and also engaged in providing services, availed
CENVAT credit of duty paid on inputs, input services and capital goods.
Without obtaining registration as input service distributor (ISD),
CENVAT credit of one unit was utilised for discharging liability of
another unit. However, detailed records were maintained in respect of
such cross utilisation. Revenue authorities denied credit on the ground
that ISD registration was not obtained and that credit of one unit is
utilised for discharging liability of another unit without pro-rata
distribution. However, the Tribunal decided the matter in assessee’s
favour. Revenue preferred appeal before the High Court.
Held
The
Hon’ble High Court observed that at the relevant time, there was no
restriction of pro-rata distribution in Rule 7 of CENVAT Credit Rules.
It further held that there is nothing in Registration Rules or in CENVAT
Credit Rules, which would automatically and without additional reasons
disentitle an ISD from availing CENVAT credit unless and until such
registration was applied and granted. The High Court affirmed the
decision of the Tribunal that in such circumstances, requirement of
registration is procedural and curable in nature, particularly when it
is found that full records were maintained and were available to
department verifying its correctness. Accordingly, appeal of the
department was dismissed.
