2015 (2) TMI 389 - AT - Service Tax

Cenvat Credit - Denial of input service credit on the ground that appellant is a output service provider as well as engaged in the activity of trading- Penalty u/s 78 - Held that - appellant is not entitled to take Cenvat credit of the common services used by them attributable to trading activity. - the appellant is not entitled to take Cenvat credit to the tune of ₹ 17,718/- attributable to trading activity. Further, I find that the appellant were under bonafide belief that prior to 1.4.2011, trading activity was not an exempted services. Therefore, penalty on the appellant is not imposable. In these circumstances, penalty imposed on the appellant is set aside. - Following decision of Orion Appliances Ltd. vs. CST, Ahmedabad 2010 (5) TMI 85 - CESTAT, AHMEDABAD - Decided partly in favour of assessee.

Summary

Issues:
Appeal against denial of input service credit for trading and output services.

Analysis:
1. The appellant, engaged in output services and trading, faced denial of input service credit by audit objections. A show cause notice was issued to deny credit of &8377; 4,10,320 for common services used in both trading and output services.

2. The appellant argued that prior to 1.4.2011, trading was not exempted, so they believed they could claim full credit. They cited a Tribunal case for proportionate denial of credit, suggesting only &8377; 17,718 should be disallowed. They sought setting aside the demand and no penalty imposition.

3. The respondent contended that although proportionate credit was allowed in a previous Tribunal case, both lower authorities upheld the full denial of &8377; 4,10,320. Any miscalculations were suggested to be referred back for corrections.

4. The Tribunal found no dispute on merits, relying on the precedent. It determined that only &8377; 17,718 of credit related to trading should be disallowed, considering audit objections and show cause notice details. The appellant's genuine belief pre-2011 led to the penalty being set aside.

5. Consequently, the Tribunal disposed of the appeal by allowing proportionate denial of credit, setting aside the penalty due to the appellant's genuine belief, and emphasizing the need for accurate calculations in such cases.