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Input Service Distributor - Term 'Office' used in Rule 2(m) of CENVAT Credit Rules cannot be restricted to only 'Head office'- Distribution of credit from Regional offices is also permissible: CESTAT

By TIOL News Service

CHENNAI, AUG 06, 2015: THE appellant is a manufacturer of cement. It had consumed input service credit distributed by its Head Office in Chennai and Regional Offices in Tamil Nadu as well as in Kerala. Interpreting the definition under Rule 2 (m) of the Cenvat Credit Rules, 2004, Revenue's allegation was that the credit distributed by Head Office is only permissible to the manufacturer/appellant but not the credit distributed by its Regional offices. Since the term "an office" used in the said Rule which came into force with effect from 10.09.2004 does not include a place beyond head office.

Before the Tribunal, Revenue contended that if credit is distributed by "an office" only and that too the "Head Office" that is permissible for Cenvat credit. The Commissioner rightly held that whosoever grants credit does not become ISD. Rule 7 along with Rule 2 (m) of Cenvat Credit Rules, 2004 being regulatory measure that protects the interests of Revenue preventing abuse of Cenvat Credit.

After hearing both sides, the Tribunal allowed the appeal by holding that:

No doubt, the definition of input service distributor using the term "an office" is applicable to the appellant, but the term "an office" cannot be limited to a physical boundary but shall be interpreted as different boundaries which are offices and distribute the credit. The requirement is that credit distributing agency should be "an office" only but not a confined boundary. The reason is probably "an office" maintains record to verify the credit distributed.

The term "an office" used in Rule 2 (m) of Cenvat Credit Rules, 2004 is to be read in plurality in the context in which that is used and any narrow meaning given to the term "an office" would defeat the spirit of the provisions in section 13 (2) of General Clauses Act.

The assessee is not merely entitled to take credit of the unit where the product is manufactured, but it may also get credit of input tax paid by its head office to arrest cascading effect which is the mandate of Rule 7 of Cenvat Credit Rules, 2004.

(See 2015-TIOL-1620-CESTAT-MAD)


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