2018 (7) TMI 526 - AT - Central Excise

CEVAT credit - common input services for manufacture of dutiable as well as exempt goods - trading goods - Held that - In this case, prior to 1.4.2011, no demand is sustainable against the appellant as prior to that, the trading activity was not an exempted service. Therefore, the demand pertaining prior to 2011 is set aside. For the demand post 1.4.2011, for export of goods whatever inputs service credit pertaining to export, appellant is not required to pay 6% of the value of goods exported as held in the case of M/s. Cap & Seal (Indore) Pvt. Ltd. vs. CCE, Ujjain 2018 (3) TMI 410 - CESTAT NEW DELHI , where it was held that the appellant is not required to pay 6% of the value of traded goods for export. Penalty - Held that - The appellant has already reversed the cenvat credit pertaining to the trading activity related to home consumption, along with interest - demand not sustainable - As demands are not sustainable, no penalty is imposable on the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Demand of 6% on trading goods prior to 2011
- Applicability of cenvat credit for export trading activity
- Reversal of cenvat credit for trading activity for home consumption
- Imposition of penalty

Analysis:

Issue 1: Demand of 6% on trading goods prior to 2011
The appellant contested the demand raised for the period from 2009-2014, arguing that trading activity was not exempted service before 1.04.2011. The Tribunal found merit in this argument and set aside the demand pertaining to the period before 2011, as trading activity was not considered an exempted service during that time.

Issue 2: Applicability of cenvat credit for export trading activity
The appellant claimed entitlement to cenvat credit for export of goods, citing a Tribunal decision in the case of M/s. Cap & Seal (Indore) Pvt. Ltd. The Tribunal agreed with the appellant, ruling that for export of goods, the appellant is not required to pay 6% of the value of goods exported, in line with the precedent set by the mentioned case.

Issue 3: Reversal of cenvat credit for trading activity for home consumption
The appellant had already reversed the cenvat credit related to trading activity for home consumption, along with interest, after the show cause notice but before adjudication. Considering this action, the Tribunal concluded that the demand against the appellant for trading activity related to home consumption was not sustainable, leading to the dismissal of the demand and the subsequent imposition of any penalty on the appellant.

In conclusion, the Tribunal allowed the appeal, setting aside the demand for the period before 2011 and ruling in favor of the appellant regarding the applicability of cenvat credit for export trading activity and the reversal of cenvat credit for trading activity for home consumption. The decision was made based on the specific circumstances and legal precedents cited during the proceedings.