2015 (6) TMI 788 - AT - Service Tax

Denial of CENVAT Credit - Trading service - Invocation of extended period of limitation - Held that - There was a clear scope for genuine confusion in the matter. Ld. Departmental Representative contends that if there was indeed a bona fide belief on the part of the appellants, they would have mentioned the trading activities in ST-3 returns under exempted category but that trading is an exempted service was clarified by an amendment to the Act only with effect from 01.04.2011. Further, several of the services in respect of which the credit is sought to be denied were those covered under sub-Rule (5) of Rule 6 of CENVAT Credit Rules. In these circumstances, the appellants have been able to make out a case that the extended period is not invokable. I find that the period involved in this case is 01.04.2005 to 31.03.2010 and the Show Cause Notice was issued on 16.05.2011. Thus, it is evident that no part of the impugned demand is within the normal period of one year with reference to the date of issue of Show Cause Notice and therefore I hold the demand to be time barred. - Decided in favour of assessee.

Summary

Issues Involved:
- Disallowance of CENVAT credit on various services for trading activity being an exempted service
- Availability of CENVAT credit in relation to specific services
- Interpretation of relevant case laws regarding admissibility of credit for trading activity
- Applicability of extended period for demand

Analysis:

Issue 1: Disallowance of CENVAT credit on various services for trading activity being an exempted service

The appellants, an authorized service station and dealer of a motor company, had taken CENVAT credit on services like Security Agency, Telephone, Insurance, Renting of Property, Banking, Financial, Management, Maintenance, Repair, GTA, and Courier services. The revenue disallowed the service tax amount and imposed penalties, claiming that the credit was related to the trading activity, which was exempted. The period in question was from 01.04.2005 to 31.03.2010. The appellants argued that the explanation regarding trading as an exempted service was added only from 01.04.2011. They also cited a CESTAT judgment to support their claim that the impugned services should qualify for input service credit.

Issue 2: Availability of CENVAT credit in relation to specific services

The appellants contended that CENVAT credit for services like Security Agency, Telephone, Courier, MMR, Banking, and Financial services was available even if used for taxable and exempted services, as per Rule 6(5) of CENVAT Credit Rules, 2004. They highlighted that this rule was omitted only from 01.04.2011. They further emphasized that there was no suppression or misstatement during an audit in 2007-08, supporting their claim for credit.

Issue 3: Interpretation of relevant case laws regarding admissibility of credit for trading activity

The revenue cited a case where it was held that credit for services used in trading activity was not admissible. However, the appellants referred to another case to argue that the impugned services should qualify for input service credit. The differing views of CESTAT in various judgments added complexity to the interpretation of the law in this matter.

Issue 4: Applicability of extended period for demand

Considering the differing views of CESTAT and the timing of the clarification regarding trading as an exempted service, the tribunal found scope for genuine confusion. The tribunal noted that the demand was beyond the normal one-year period from the issue of the Show Cause Notice, making it time-barred. As a result, the impugned order was set aside, and the appeal was allowed, ruling in favor of the appellants.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the tribunal's reasoning in reaching its decision.