2018 (9) TMI 316 – CESTAT CHENNAI – TMI – CENVAT Credit – trading activity – common input services availed for taxable service as well as for trading – non-maintenance of separate records – what is the amount that the appellant has to reverse when common input services have been used for taxable service as well as trading when separate accounts have not been maintained?
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Held that:- With effect from 1.4.201, the position is very clear for the reason that trading has been made a deemed exempted service and Rule 6(3D)(c) of CENVAT Credit Rules clearly provided for the formula to arrive at the amount that has been reversed. However, for the period prior to 1.4.2011, there was much confusion as to whether trading is an exempted service or can be considered as service at all – In Ruchika Global Interlinks Vs. Commissioner of Central Excise [2017 (6) TMI 635 – MADRAS HIGH COURT], the jurisdictional High Court has held that the trading is to be considered as an exempted service prior to
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ion services and are also registered for services such as health and fitness service, tour operator service, air and railway travel agency service etc. They had availed common input services for taxable service as well as for trading. Since they had not maintained separate accounts, department was of the opinion that the credit availed in respect of trading is not eligible. Show cause notices were issued proposing to disallow credit and demand the credit proportionate to the turnover of the traded goods. After due process of law, the original authority confirmed the demand along with interest and also imposed penalties. Hence these appeals. 3. The ld. counsel Shri S. Thirumalai submitted the details of the demand in each appeals, which is shown in the Table:- S. No. Particulars ST/516/2011 ST/3354/2012 1. Period of Demand April 2008 to March 2009 April 2009 to March 2011 2. Demand of CENVAT credit 86,05,464/- 1,93,20,468/- Interest under Rule 14 of CENVAT Credit Rules, 2004 r/w Section
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ever, the demand has been raised on the turnover of the traded goods. The appellant has already suffered VAT on the traded goods and therefore the demand made on turnover traded goods will not sustain. He relied upon the decision in the case of M/s. TFL Quinn India Pvt. Ltd. Vs. Commissioner of Central Excise, Hyderabad – 2016-TIOL-856-CESTAT-HYD to argue that the Tribunal in the said case had considered that for the period prior to 1.4.2011 also the said formula can be applied. Similar view was taken by the Tribunal in the case of Mercedes Benz India Pvt. Ltd. Vs. Commissioner of Central Excise – 2015 (40) STR 381. 5. The ld. AR Shri K. Veerabhadra Reddy supported the findings in the impugned order. 6. Heard both sides. 7. The issue that has to be analyzed is only as to what is the amount that the appellant has to reverse when common input services have been used for taxable service as well as trading when separate accounts have not been maintained. With effect from 1.4.201, the posit
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reverse the credit as per the formula in Rule 6(3D)(c) of CENVAT Credit Rules, 2004 in respect of trading. However, the said amount has to be quantified. The appellant also contends that they have reversed the said amount pertaining to trading. This requires verification and for its quantification of the amounts that has to be reversed by the appellant, applying the ratio laid down in the case of TFL Quinn India (supra), we remand the matter to the adjudicating authority. Since the issue was interpretational and mired under litigation for a long time, we are of the considered opinion that there cannot be any penalty imposed on the appellant. 8. From the above discussion, we hold that the impugned order is set aside and remand the matter to the adjudicating authority for the limited purpose for requantification of the amount that the appellant has to reverse as per the directions given above. We set aside the penalties imposed. The appellant, however, will be liable to pay interest if a
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