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2024 (3) TMI 239 - AT - Service TaxCENVAT Credit - input services, also utilized for trading (sale of cars) which is not a taxable output service - common input services - invocation of extended period of limitation - October 2007 to March 2011 - HELD THAT - The issue in the present appeal is no more res integra and was considered by the Hon ble Telangana High Court in the case of M/S TIARA ADVERTISING VERSUS UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE 2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT where it was held that the second respondent did not choose to exercise power under this Rule but relied upon Rule 6(3)(i) and made the choice of the option thereunder for the petitioner, viz., to pay 5%/6% of the value of the exempted services. The statutory scheme did not vest the second respondent with the power of making such a choice on behalf of the petitioner. The Order-in-Original, to the extent that it proceeded on these lines, therefore cannot be countenanced. The Tribunal in the case of M/S. INGERSOLL-RAND TECHNOLOGIES AND SERVICES PRIVATE LIMITED VERSUS COMMISSIONER, CENTRAL EXCISE, GHAZIABAD 2022 (8) TMI 877 - CESTAT ALLAHABAD have held that for not exercising the option under Rule 6 of the Credit Rules, the option of payment of 5/6% of trading of goods ( exempted service ) cannot be thrust upon the appellant. It is not necessary to examine the contention advanced by the learned counsel for the Appellant regarding invocation of the extended period of limitation. The impugned order cannot be sustained and accordingly the same is set aside - Appeal allowed.
Issues Involved:
1. Availment of Cenvat credit on input services utilized for trading activities. 2. Applicability of Rule 6 of the Cenvat Credit Rules, 2004. 3. Invocation of extended period of limitation. Summary: Issue 1: Availment of Cenvat credit on input services utilized for trading activities The appellant, an authorized dealer and service center of M/s Maruti Udyog Ltd., availed Cenvat credit on input services used for both taxable services and trading (sale of cars). The Department contended that trading is not a taxable output service and thus, the appellant's utilization of 100% Cenvat credit on common input services was improper. The audit observed that the appellant did not maintain separate accounts for input services used for taxable and exempted services. Issue 2: Applicability of Rule 6 of the Cenvat Credit Rules, 2004 The Show Cause Notice (SCN) alleged that the appellant failed to maintain separate accounts or reverse 6% of the value of exempted services, thus requiring a proportionate reversal of Cenvat credit. The appellant argued that the sale of cars is not a service and thus does not fall under exempted services. The Tribunal referred to the Hon'ble Telangana High Court's decision in Tiara Advertising v. Union of India, which clarified that Rule 6(3) of the Cenvat Credit Rules, 2004, offers options to service providers who do not maintain separate accounts, but these options cannot be imposed by the authorities. The Tribunal also cited similar judgments from the Hon'ble High Court of Calcutta and CESTAT Allahabad, reinforcing that trading was not considered an exempted service prior to 01.04.2011, and the authorities could not mechanically invoke a 5% rule on the appellant. Issue 3: Invocation of extended period of limitation The appellant contended that the extended period of limitation is not applicable. However, the Tribunal did not find it necessary to delve into this contention due to the resolution of the primary issues. Judgment: The Tribunal set aside the impugned order, agreeing with the appellant's arguments and citing relevant case law. It concluded that the authorities could not impose the reversal of Cenvat credit based on Rule 6(3) without the appellant's choice and that trading activities were not considered exempted services prior to 01.04.2011. Consequently, the appeal was allowed with consequential relief as per law.
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