Wrong credit distributed by ISD to its units can be rectified if the unit reverses that credit and issue a document confirming the same.

Facts: In this case, the Appellant have three plants situated at different locations and is appellant in Appeal No. ST/333/2011 and is registered as ISD. M/s. Pricol Ltd, Plant 1 is one of their manufacturers and is the appellant in appeal no ST/332/2011. It appeared that ISD unit distributed credit in an unauthorised manner. It further appeared that inasmuch as M/s. Pricol Ltd., Plant 1 is not even a person liable to pay service tax, the unauthorised transfer of service tax and issue of invoice for input credit transferred appear to be wrong. The department was of the view that M/s. Pricol Ltd., ISD has availed credit on the strength of improper documents and is liable to penal action. Henceforth, SCN was issued on the appellant. The Adjudicating authority confirmed the order to recover CENVAT credit from the appellant.

Held: The Hon’ble CESTAT bench held that the appellant satisfies the conditions mentioned in rule 7 of CCR rules, 2004. There is no specific provision to facilitate return of non-required credit which has been transferred in first place by the ISD, but it has to be kept in mind that there would be situations in which ISD transfers the credit inadvertently or in excess of what was intended to a constituent unit. In such cases the only recourse would be by way of return/ reversal of such credit back to the ISD which in turn can be facilitated only by the recipient unit reversing the unintended credit and issuing a document confirming the facts of the same. It is also to be keep in mind that there is no procedure prescribed in law for such reversal. Therefore, this is the only way such act can be corrected.

To read the complete judgment 2018 Taxo.online 968