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2013 (11) TMI 1357 - AT - Service TaxCENVAT Credit - Classification of service - Whether trading could be treated as an exempted service for the purpose of Cenvat credit - Held that - dispute on the issue stands clarified by CBEC in favour of the appellant. Prima facie, we agree with the advocate for the applicant because credit was taken in accordance with provisions of rule 6(5) as it was existing at the relevant time and in the matter of utilization, applicant was complying with extant rule 6(3) of the rules as it was existing at the relevant time. Cenvat Credit so accumulated could not lapse in the absence of any legal provisions to that effect. This position also is accepted by CBEC also in its circular. So its subsequent utilisation cannot be faulted - Stay granted.
Issues:
1. Interpretation of Cenvat Credit Rules, 2004 regarding the treatment of trading as an exempted service. 2. Utilization of accumulated Cenvat credit as on 31-03-2008 after the amendment of Rule 6(3) on 01-04-2008. 3. Dispute over the denial of credit for input services used exclusively for trading activity and proportionate credit attributable to trading activity. 4. Discrepancies related to the timing of taking credit before payment to input service provider and adjustment of excess tax paid in subsequent periods. Issue 1: Interpretation of Cenvat Credit Rules regarding trading as an exempted service The applicant, a retail outlet providing advertising space services, faced a challenge from the Revenue regarding the treatment of trading as an exempted service for Cenvat credit purposes. The Revenue contended that credit should only be based on the ratio of taxable services to goods traded. However, the appellant argued that CBEC clarified trading as an exempted service even before 01-04-08, requiring compliance with the 20% utilization restriction. The Tribunal agreed with the appellant, noting that the credit was taken in line with rule 6(5) and utilization complied with rule 6(3) at the time, supported by CBEC's circular. Thus, the Tribunal found the Revenue's demand on this ground unsustainable. Issue 2: Utilization of accumulated Cenvat credit post-amendment of Rule 6(3) Following the amendment of Rule 6(3) on 01-04-2008, allowing proportionate reversal of credit, the appellant utilized the unutilized credit from 31-03-2008 onwards. The Revenue raised concerns over this utilization, but the appellant cited CBEC's clarification that accumulated credit would not lapse. The Tribunal concurred, stating that in the absence of legal provisions for lapsing, the utilization of accumulated credit was in accordance with the law. Consequently, the Tribunal found no fault in the subsequent utilization of the credit. Issue 3: Denial of credit for input services used for trading activity The Revenue identified specific amounts related to the denial of credit for input services exclusively used for trading activity and proportionate credit attributable to trading. The appellant accepted the denial for services exclusively used for trading and paid the amount. The Tribunal acknowledged this payment and found the Revenue's demand on this ground acceptable, indicating compliance by the appellant in this regard. Issue 4: Timing of taking credit and adjustment of excess tax paid The Revenue also challenged the timing of taking credit before payment to the input service provider and adjustments of excess tax paid in subsequent periods. The appellant clarified that payments were made in line with eligibility for credit, with minor issues regarding interest for a month. The Tribunal considered these issues as procedural infractions without substantial revenue loss, not warranting detailed discussion. Consequently, the Tribunal admitted the appeal without pre-deposit and ordered a stay on the collection of dues during the appeal's pendency. This detailed analysis covers the interpretation of Cenvat Credit Rules, utilization of accumulated credit, denial of credit for input services, and procedural infractions addressed in the judgment, providing a comprehensive understanding of the legal issues involved.
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