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Introduction
1.Smooth flow of credit chain is very necessary to lessen the
burden of any indirect tax on the ultimate consumer. Adopting
the system of input tax credit under Sales tax Acts, CENVAT
Credit system was introduced with effect from September 10,
2004 under Excise and Service Tax which was originally
administered by the CENVAT Credit Rules, 2002 and was later
followed by the CENVAT Credit Rules, 2004.
The Concept of 'Input Service Distributor' (ISD) in the Cenvat
Credit Rules, 2004 (CCR) was introduced with a need to provide
for a mechanism to facilitate the transfer of Cenvat credit when
there is an involvement of multiple factory/premises of
manufacturer/service provider. In case of single premise/unit,
entire credit belongs to that single premise/unit and thus no
need to distribute the credit.
The Central Board of Excise and Customs, in para 10.3 of the
"Taxation of Service - An Education Guide" stated that "the
facility ofCare
registering
as an input service distributor exists to
Customer
No. 91-11-
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It has been observed in Commissioner of Service Tax, Ahmedabad v. Godfrey Philips India Ltd.
[2009 (239) E.L.T. 323 (Tri. - Ahmd.) that "The definition of the input service distributor clearly
says that he is not merely a dealer. The input service distributor has to be an office of the
manufacturer or producer of final products or provider of output service. The dealer buys the
manufactured goods on which duties have been paid and passes on the actual duty paid by
issue of an invoice. He does not take any responsibility as regards eligibility of Cenvat credit by
his buyers. Whereas an input service distributor independently receives invoice and in fact he
could be compared to a buyer of goods or service from the manufacturer or an output service
provider.
Thus, Input service distributor is not a dealer or trader in services i.e. he does not buy and sell
the services. Input service distributor receives the services for his own consumption, which
may include his own office, his branch offices or various manufacturing units located in
different places.
2.3.The word used in the definition "AnOffice" should not be read strictly and must be given
a plural sense as provided General clause Act and held in various judicial flora. Accordingly
there can be existence of more than one ISD of a manufacturer or service provider.
Customer Care No. 91-11-
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