2015 (5) TMI 533 - AT - Service Tax

Waiver of pre deposit - Eligibility of a manufacturer availing CENVAT credit of input services - Trading activity - Held that - appellant shall be liable to pay interest on the amount of irregular credit availed during the period from October 2006 to March 2008 and have to reverse proportionate CENVAT credit proportionate to the trading turnover up to March 2011. The data given by the appellant for this period has been accepted and accordingly the appellants have calculated the proportionate credit payable as ₹ 9,26,481/- and balance payable is ₹ 6,09,728/- if the entire trading value is taken for the purpose of calculation. In our opinion, prima facie the entire trading value has to be taken. In view of the above discussion, the appellant is directed to deposit the interest amount on the CENVAT credit irregularly availed during the period up to March 2008 and balance of proportionate credit and interest for the period from April 2008 to March 2011 within eight weeks - Partial stay granted.

Summary

Issues:
Eligibility of manufacturer for CENVAT credit on input services for trading activity before 1.4.2011.

Analysis:
The judgment addresses the eligibility of a manufacturer to avail CENVAT credit of input services concerning trading activity conducted before 1.4.2011. The appellant had utilized CENVAT credit during the period from October 2006 to March 2008, but was deemed ineligible for such credit in relation to trading activity from April 2009 to March 2011. The appellant was directed to reverse credit taken and pay a substantial amount with interest and penalty imposed under relevant rules.

Regarding the period from October 2006 to March 2008, the appellant's counsel argued that the appellant should not have availed more than 20% of the CENVAT credit due to providing both taxable and exempted services during that time. It was contended that since the 20% requirement was removed in 2008, the appellant should only be liable to pay interest for that period. The tribunal concurred with this argument.

For the period from April 2009 to March 2011, the appellant's counsel asserted that trading was not considered a service during that time, citing relevant case law. It was argued that the insertion of an explanation to a specific rule did not have retrospective effect, thus trading could not be deemed exempted service before 1.4.2011. Relying on precedents, the tribunal found the appellant liable to pay interest on irregularly availed credit up to March 2008 and to reverse proportionate CENVAT credit based on trading turnover until March 2011. The tribunal accepted the data provided by the appellant for this period and calculated the proportionate credit payable, directing the appellant to deposit the required amounts within a specified timeframe.

In conclusion, the appellant was instructed to comply with the deposit requirements for the irregularly availed CENVAT credit and balance dues within a specified timeframe. The tribunal granted a stay against recovery during the appeal's pendency, subject to compliance with the deposit obligations.