2017 (7) TMI 526 - AT - Service Tax

CENVAT credit - trading turnover - common input services were used for providing output services as well as for trading of the goods. It appeared to revenue that Rule 6 of Cenvat Credit Rules, 2004 were applicable only when the output service provider is engaged in both providing output service chargeable to service tax as well as exempted services and that trading activity was neither manufacture nor taxable service - Held that - the issue is no more res-integra and is squarely covered by this Tribunal s decision in the case of M/s L. G. Electronics India Ltd. Vs Commissioner of Central Excise and Service Tax, Noida 2017 (3) TMI 1355 - CESTAT ALLAHABAD , where it was held that there is no allegation in the said Cause Notice that the appellants had taken credit of any inadmissible Cenvat credit. Further the Show Cause Notice dated 09/05/2011 states that Rule 6 of Cenvat Credit Rules, 2004 is not applicable in the present case. Therefore, the said Show Cause Notice did not make out a case for invocation of provisions of Rule 14 of Cenvat Credit Rules, 2004 - appeal allowed - decided in favor of appellant.

Issues:
1. Admissibility of Cenvat credit on input services used for trading activity.
2. Application of Rule 6 of Cenvat Credit Rules, 2004 to trading activities.
3. Recoverability of Cenvat credit under Rule 14 of Cenvat Credit Rules, 2004.
4. Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004.

Analysis:
1. The appeal challenged an Order-in-Original issued against the appellant for availing service tax credit on input services without reversing any proportionate credit amount related to trading turnover. The Revenue contended that Cenvat credit on services attributable to trading of goods was inadmissible under Cenvat Credit Rules, 2004. The appellant was issued a show cause notice for allegedly wrongly availing Cenvat credit on input services during a specific period. The Revenue proposed disallowing and recovering the credit under Rule 14 of the Cenvat Credit Rules, 2004. The original authority confirmed the demand and imposed a penalty, leading to the appeal before the Tribunal.

2. The appellant argued that the issue was similar to a previous case decided by the Tribunal, where the Tribunal allowed the appeal in comparable circumstances. Both cases relied on precedents regarding the admissibility of Cenvat credit and the application of Rule 6 of the Cenvat Credit Rules, 2004. The Revenue acknowledged that the issue was covered by the Tribunal's previous decision.

3. The Tribunal, after considering submissions from both sides and reviewing the previous Final Order, found that the previous decision directly addressed the issue in the present appeal. The Tribunal quoted the relevant portion of the previous Final Order, highlighting that for the recovery of Cenvat credit under Rule 14, it must be established that the credit was taken or utilized wrongly. The Tribunal noted that the show cause notice in the present case did not make a case for invoking Rule 14 as there was no allegation of wrongly taken credit. Consequently, the Tribunal set aside the Order-in-Original and allowed the appeal, granting the appellant consequential relief.

4. Ultimately, the Tribunal ruled in favor of the appellant based on the precedent and set aside the impugned Order-in-Original, allowing the appeal and entitling the appellant to consequential relief as per the law. The decision emphasized the importance of establishing the inadmissibility of Cenvat credit before invoking recovery provisions under Rule 14 of the Cenvat Credit Rules, 2004.

This detailed analysis of the judgment comprehensively covers the issues involved and the Tribunal's decision based on legal principles and precedents.

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