2015 (8) TMI 156 - AT - Service Tax

Reversal of CENVAT Credit - Trading activity - Exempted services or not - Held that - stay order 2015 (1) TMI 223 - CESTAT NEW DELHI was issued at a time when the explanation under Rule 2(e) specifically stating that exempted services includes trading was not in existence. In view of the amendment to Rule 2(e) specifically mentioning that exempted services includes trading, we are of the view that the case does not deserve full waiver from pre-deposit. However, having regard to the fact that the said explanation was added for removal of doubts, we order pre-deposit of only ₹ 64,82,994/- with proportionate interest within four weeks - Partial stay granted.

Summary

Issues:
1. Demand confirmation for providing taxable and exempted services without maintaining separate accounts.
2. Contention regarding trading activity being exempted service.
3. Interpretation of Rule 2(e) of the Cenvat Credit Rules, 2004.

Analysis:
1. The appellant filed a stay application and appeal against the Order-in-Original confirming demands for taxable and exempted services without separate account maintenance. The demand was based on the appellant's failure to pay a percentage of the value of exempted services under specific notifications due to not maintaining separate accounts for Cenvat credit. The appellant argued that trading activity, considered exempted service, was not a service but a trading activity. The appellant also highlighted a previous waiver granted by CESTAT for a similar issue.

2. The Departmental Representative (DR) contended that trading is considered an exempted service as per an explanation added to Rule 2(e) of the Cenvat Credit Rules, 2004. The presence of this explanation was used to justify the sustainability of the demand. The Tribunal considered both arguments and noted that the previous waiver was granted before the specific mention of trading as an exempted service in Rule 2(e). Due to the subsequent amendment clarifying that trading falls under exempted services, the Tribunal decided that full waiver was not warranted. Consequently, the Tribunal ordered a pre-deposit of the demanded amount with interest within a specified timeline, with compliance to be reported by a certain date. The remaining adjudicated liability was stayed pending the appeal, subject to compliance. Failure to comply would result in dismissal of the appeal for lack of pre-deposit.

3. The Tribunal's decision was based on the interpretation of Rule 2(e) of the Cenvat Credit Rules, 2004, specifically the inclusion of trading as an exempted service. The Tribunal balanced the appellant's argument regarding the nature of trading activity with the legal framework and recent amendments to the rules. The decision emphasized the importance of compliance with the amended rules and the need for pre-deposit to continue the appeal process effectively.