2015 (3) TMI 89 - AT - Service Tax

Denial of CENVAT Credit - Input service - Business Auxiliary Service - Held that - Following decision of CCE Vs Cadila Healthcare Ltd. 2013 (1) TMI 304 - GUJARAT HIGH COURT - respondents are eligible for the input credit of ₹ 7,01,979/-. Therefore, I do not find any infirmity in the order of Commissioner (Appeals) to the extent of allowing credit on input services. As regards availment of credit on common input services - Held that - respondents holding centralised registration and not maintained separate accounts of input services for the trading activity as well as for the taxable service. I find from the records and findings of the OIO, there is no dispute on the fact that respondents are carrying out both trading activity and taxable service under BAS as commission agents. The Division Bench of the Tribunal in the case of Mercedes Benz India Pvt. Ltd. Vs CCE Pune-I (2014 (4) TMI 12 - CESTAT MUMBAI) has clearly held that entire credit on trading activity is not eligible and only proportionate credit with reference to turnover is eligible. - respondents are not eligible for the entire credit availed on the common input services. Since the department rightly demanded the excess credit of ₹ 6,78,459/- which is in excess of 20% of the total service tax payable, the respondents paid the excess amount and they are not eligible to take re-credit in cenvat account nor they are eligible for refund. The adjudication order rejecting the refund of ₹ 6,78,459/- and the interest amount is upheld and the L.A.A. order allowing credit is liable to be set aside.- Decided partly in favour of Revenue.

Summary

Issues:
Appeal against rejection of refund claim under Cenvat Credit Rules, 2004.

Analysis:
The case involved an appeal by the Revenue against the rejection of a refund claim by the respondents under the Cenvat Credit Rules, 2004. The respondents, registered as commission agents engaged in trading, had availed cenvat credit on certain ineligible input services and utilized excess credit on common input services used for both trading and taxable services. The adjudicating authority rejected the refund claim, leading to an appeal by the respondents, which was allowed by the Commissioner (Appeals), setting aside the impugned order. The Revenue then filed the present appeal.

The main contention raised by the Revenue was that the respondents were not eligible to avail full credit on common input services used for both trading and taxable services, as they had not maintained separate accounts. The Revenue argued that the respondents had availed credit on ineligible input services that had no nexus with their output service as commission agents. The Revenue relied on a Tribunal's decision in a similar case to support their argument.

On the other hand, the respondents contended that they were eligible for full credit on the common input services as they were used in relation to the output service they rendered. They cited various decisions to support their position, highlighting that the services for which they availed credit were relevant to their business activities.

The Tribunal examined the preliminary objections raised by the consultant and found them to be without merit. On the merits of the case, the Tribunal noted that the respondents had availed ineligible credit on common input services and other input services. However, the Tribunal agreed with the Commissioner (Appeals) that the respondents were eligible for the input credit on certain services used in relation to their output service.

Regarding the excess credit availed on common input services, the Tribunal referred to a Division Bench decision that stated only proportionate credit with reference to turnover was eligible. As the respondents had paid the excess amount and were not eligible for re-credit or refund, the Tribunal upheld the adjudication order rejecting the refund and set aside the Commissioner (Appeals) order allowing the credit.

In conclusion, the revenue appeal was partly allowed, setting aside the credit of excess credit on common input services and restoring the original adjudication order. The cross objection filed by the respondent was also disposed of accordingly.