The Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled in favour of Hindustan Coca-Cola, stating that the beneficiary of credit under rule 7 of the CENVAT Credit Rules, 2004 cannot be obligated under rule 3(1) of the same rules.
Hindustan Coca-Cola Beverages Pvt Ltd, Raigarh, the appellant, is registered as a “input service distributor (ISD)” and has taken the disputed credit for being passed on to a number of their undertakings, including the appellant in this case, under the authority of rule 7 of the CENVAT Credit Rules, 2004.
Know the complete aspects of tax implications of succession, Click here
The Commissioner of GST & Customs (Appeals), Goa, upheld the recovery of ₹ 24,12,150 and ₹ 11,56,666 under rule 14 of the CENVAT Credit Rules, 2004 and interest thereon against Hindustan Coca-Cola Beverages for using credit that did not meet the definition of “input service” in section 2(l) of the CENVAT Credit Rules, 2004 and confirmed by the original authority, with the exception of ₹ 19,159 for the period from June 2015 to March 2017 and ₹ 2,03,804 for the period from April 2017 to June 2017.
The appellant argued that demand could not continue because they had only added to their credit from the “input service distributor’s” pool, which they then used to pay central excise taxes on their own manufactured goods. According to rule 3 of the CENVAT Credit Rules, 2004, they had not claimed credit, therefore any errors in their availment could not be attributed to them.
The appellant argued that neither the “provider of service’s” or the “input service distributor’s (ISD)” payment of tax liability was in question and that the main issue was the connection between the service they had purchased and their activities, which was outside the purview of rule 7 of the CENVAT Credit Rules, 2004.
The department said that the appellant in this case was properly invoked under rule 14 of the CENVAT Credit Rules, 2004 because the procedures had been started because the appellant had misused credit. According to him, the “input service distributor (ISD)” system is just a transit and does not impose any requirement that the distributor be evaluated for compliance with the definition of “input service” as stated in rule 2(l) of the CENVAT Credit Rules, 2004.
Want a deeper insight into the Income Tax Bill, 2025? Click here
The bench of C J Mathew (Technical Member) has observed that since it has not been demonstrated that rule 3(4) of the CENVAT Credit Rules, 2004 has been broken, the appellant has only used the credit and is unconcerned with its origin.
While allowing the appeal, the department stated that the credit has to be accounted for only by the manufacturing unit or service providing unit which a ‘distributor’ is not. The Tribunal set aside the orders which were passed without authority of law.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
