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2017 (2) TMI 482 - AT - Central ExciseCENVAT credit - Business Auxiliary Services - Servicing of Motor Vehicles - common input services - denial on the ground that the same was not used in manufacture of dutiable goods - Held that - the very identical issue has been considered by this Tribunal in the cases of Badrika Motors Pvt. Ltd. 2014 (1) TMI 316 - CESTAT NEW DELHI , where the Cenvat credit was denied on the GTA service on the ground that the GTA service has no nexus with the taxable service such as Authorized Service Station and Business Auxiliary Service. This Tribunal has held that no arithmetical correlation is required between the input and output services and accordingly the credit was allowed - the appellant is not required to reverse the Cenvat credit attributed to the trading activity of passenger cars. Extended period of limitation - Held that - in the absence of ingredients such as fraud, collusion, suppression of fact, etc., with intent to evade payment of duty, the penalty is not imposable under Section 78 - Considering this finding which equally applicable in case of invocation of extended period in terms of proviso to Section 73, the demand is not sustainable on the ground of time-bar also. Impugned order not sustainable on merit as well as on limitation - appeal allowed - decided in favor of appellant.
Issues:
1. Availing of Cenvat credit on common input services for trading activity. 2. Applicability of Rule 6 of Cenvat Credit Rules prior to 1-4-2011. 3. Time-bar for demand raised by the show cause notice. 4. Interpretation of judgments related to denial of Cenvat credit for trading activity. 5. Applicability of penalties under Sections 77 and 78 of the Act. Analysis: 1. The appellant was engaged in manufacturing S.S. Sinks and trading activities of goods like Taps, Bio Food Disposer, etc. The issue arose when a show cause notice contended that Cenvat credit on common input services used for trading activity should be recovered as it was not used in manufacturing dutiable goods. The adjudicating authority and Commissioner(Appeals) upheld the demand, leading to the appeal. 2. The consultant for the appellant argued that prior to the amendment on 1-4-2011, Rule 6 did not deny credit for input services used in both manufacturing and trading activities. He emphasized that the trading activity was not considered an exempted service before 1-4-2011. The consultant also argued that the demand was time-barred as the notice was issued after the period in question. The consultant cited various judgments to support these arguments. 3. The Revenue reiterated the findings of the impugned order, supporting the denial of Cenvat credit for trading activities. 4. The tribunal examined the issue and noted that Rule 6 became applicable from 1-4-2011, making trading activity an exempted service. Citing judgments like Kundan Cars Pvt Ltd, the tribunal concluded that prior to 1-4-2011, there were no provisions to deny credit for trading activities. The tribunal also discussed judgments related to denial of Cenvat credit for trading activities, ultimately ruling in favor of the appellant based on previous tribunal decisions. 5. Regarding penalties under Sections 77 and 78, the Commissioner(Appeals) found that there was ambiguity in the issue before 1-4-2011, leading to the introduction of an explanation under Rule 2(e) of the CCR. As there was no intent to evade duty, the penalty under Section 78 was deemed incorrect. The tribunal concurred with this finding, stating that the demand was not sustainable on the grounds of time-bar and merit. The appeal was allowed based on the tribunal's analysis and the finality of the Commissioner(Appeals) finding on penalties. In conclusion, the tribunal set aside the impugned order and allowed the appeal based on the analysis of relevant legal provisions, judgments, and penalties under the Act.
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