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2017 (9) TMI 1373 - AT - Central ExciseCENVAT credit - input services - services used attributable to trading activity - Held that - the issue is squarely covered by the decision of the Tribunal in Godfrey Phillips India Ltd. & Ors. 2016 (12) TMI 436 - CESTAT MUMBAI , where it was held that The said credit needs to be reversed in proportion to the trading turnover and the total turnover - demand of reversal of cenvat credit is sustained. Extended period of limitation - Penalty - Held that - in the case of Godfrey Phillips India Ltd., it was seen that The appellants have not reversed any credit on their own and only when they were investigated that they have reversed as per their own calculation. There was no doubt regarding liability to reverse, extended period and penalty upheld - Relying on the said decision, penalty and the extended period of limitation is also upheld. Appeal allowed - decided in favor of Revenue.
Issues:
- Appeal against dropping the demand of reversal of cenvat credit for input services used in trading activity - Interpretation of Rule 6(5) of Cenvat Credit Rules, 2004 - Imposition of penalty and invocation of extended period of limitation Analysis: Issue 1: Appeal against dropping the demand of reversal of cenvat credit The appeal was filed by Revenue against the order of Commissioner (Appeals) dropping the demand of reversal of cenvat credit for input services used in trading activity. The appellant argued that the issue was covered by a previous Tribunal decision in the case of Godfrey Phillips India Ltd. & Ors. where penalty and extended period of limitation were upheld. The respondent, engaged in both manufacturing and trading activities, contended that reversal of cenvat credit was not required for the period before 01.04.2011 in respect of input services attributable to trading activity. They had already reversed the cenvat credit along with interest. The Tribunal found that the issue was indeed covered by the Godfrey Phillips case and upheld the demand for reversal of cenvat credit. Issue 2: Interpretation of Rule 6(5) of Cenvat Credit Rules, 2004 The Tribunal referred to the interpretation of sub-rule (5) of Rule 6 of Cenvat Credit Rules, 2004 as discussed in the Godfrey Phillips case. It was held that the benefit of Rule 6(5) of Cenvat Credit Rules could not be extended in respect of trading activities. The Tribunal ruled that the credit needed to be reversed in proportion to the trading turnover and the total turnover. Therefore, the demand for reversal of cenvat credit was sustained based on the interpretation of Rule 6(5). Issue 3: Imposition of penalty and invocation of extended period of limitation Regarding the imposition of penalty and invocation of extended period of limitation, the Tribunal relied on the Clariant Chemicals case where it was observed that the extended period was correctly invoked due to the suppression of facts regarding trading activities. The Tribunal emphasized the primary responsibility of the assessee to correctly take/reverse the credit and noted that the penalty imposed under Rule 15 of the Cenvat Credit Rules along with Section 11AC of the Central Excise Act was justified. The Tribunal upheld the penalty and extended period of limitation, stating that the appellants had contested only the quantification and not the liability to reverse the credit. Therefore, the penalty and the extended period of limitation were upheld, and the appeal of Revenue was allowed. This detailed analysis covers the issues involved in the legal judgment comprehensively, addressing the arguments presented by both parties and the Tribunal's reasoning in reaching its decision.
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