2019 (3) TMI 151 - AT - Service Tax

CENVAT Credit - common services on taxable as well as exempt goods - trading activity - Rule 6 (3) of the Cenvat Credit Rules, 2004 - period April 2008 to March, 2012 - extended period of limitation - Held that - For the period prior to 01.04.2011, there were divergent views of this Tribunal, in that circumstances, for the period prior 01.04.2011 demand on account of reversal of Cenvat Credit of common input services used for trading activity is not required to be reversed as show cause notices has been issued on 08.10.2013 and 10.10.2013 for the period upto March, 2012 by invoking extended period of limitation. As appellants have contended that for the period post 01.04.2011, the appellant is reversing cenvat credit attributable to common input services availed for trading activity, in that circumstances, cenvat credit cannot be asked to reverse by the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against denial of cenvat credit on common services.

Analysis:
The appellant, engaged in trading of Tata vehicles and operating an authorized service station, was denied cenvat credit on common services attributable to trading activity. Two show cause notices were issued for the period April 2008 to March 2012, invoking Rule 6(3) of the Cenvat Credit Rules, 2004. The appellant argued that prior to April 2011, trading activity was not considered an exempt service based on various judicial pronouncements. Therefore, they contended they were entitled to cenvat credit citing cases like Kundan Cars Pvt. Ltd. vs. CCE, Pune and others. Post April 2011, the appellant agreed to reverse cenvat credit attributable to trading activity for common input services. The respondent relied on the decision of the Madras High Court in the case of Ruchica Global Interlinks.

The Tribunal noted the divergent views on whether trading activity was exempt prior to April 2011. As the show cause notices were issued in 2013 for the period up to March 2012, the demand for reversal of cenvat credit for common input services used in trading activity prior to April 2011 was deemed unnecessary. For the period post April 2011, where the appellant was already reversing cenvat credit for trading activity, the Tribunal found no basis to ask for further reversal. Consequently, the impugned order denying cenvat credit on common services was set aside, and the appeals were allowed with any consequential relief.

This judgment clarifies the applicability of cenvat credit rules concerning common services used in trading activities, considering the period before and after April 2011 and the differing judicial interpretations during those times.