2017 (12) TMI 1298 - AT - Central Excise

CENVAT credit - trading activity - input services that were allegedly utilised in common for both producing excisable goods and rendering exempted service by the appellant - Held that - for the period prior to April 2011, trading was outside the coverage of CCR, 2004 and hence could not be described as exempted goods within the meaning of section 2(e) of CCR, 2002 - appeal allowed - decided in favor of appellant.

Summary

Issues:
Disallowed CENVAT credit for input services used for both excisable goods production and exempted services.

Analysis:
The judgment pertains to an appeal by a company challenging the disallowance of CENVAT credit by the Commissioner of Central Excise (Appeals) for the period from September 2010 to March 2011. The company, engaged in producing excisable goods, trading, and rendering exempted services, contested the denial of credit on input services used for both activities. The issue revolved around the eligibility of the company to claim CENVAT credit on input services utilized for trading, considered an exempted activity. The company relied on a Tribunal decision and argued that the insertion of an explanation in March 2011 expanded the scope of exempted services, allowing them to claim credit on taxes paid for input services.

The Tribunal considered the arguments presented and examined the legal implications of the explanation inserted in March 2011. Referring to precedents and legal principles, the Tribunal highlighted that substantive amendments, even in the form of explanations, cannot have retrospective effect unless expressly provided. Citing relevant case laws, the Tribunal emphasized that explanations are not conclusive and do not automatically apply retrospectively. The Tribunal drew parallels with similar cases to reinforce the principle that amendments, especially those widening the tax net, do not operate retrospectively unless specifically indicated.

In light of the legal analysis and precedents cited, the Tribunal concluded that trading, prior to April 2011, fell outside the purview of the CENVAT Credit Rules, 2004. Therefore, the trading activity could not be categorized as exempted goods under the relevant rules. Consequently, the appeal was allowed, and the impugned order disallowing the CENVAT credit was set aside. The decision was pronounced in court on 10/11/2017, providing clarity on the interpretation of the rules regarding CENVAT credit eligibility for input services used in multiple business activities.