2024 (6) TMI 907 - AT - Central Excise

CENVAT Credit - trading of investments, investment in shares - input services which were common to both manufacturing and trading activity - violation of rule 6(3)(i) of CCR, 2004 - HELD THAT - The fact remains that there were investments in shares and securities, which is clearly a trading activity which is an exempted Service. The original authority has thought it fit to invoke Rule 6(3)(i) ibid to demand the quantum of credit that would have been availed as common input service on the exempted activity at 10% of the purchase price vide OIO No. LTUC/85/2013-ADC dated 29.3.2013. When the taxpayer challenged the said demand of the original authority, the first appellate authority having considered the amendment in the statute, has set aside the demand raised by the original authority vide OIA N0. 162/2015 dated 1.1.2015 - in order to quantify the consequential demand to be raised on the taxpayer, the first appellate authority has remitted the file to the original authority. The taxpayer - appellant being aggrieved against the above OIA, is before us by this appeal. The trading activity undertaken by the appellant remains disputed, though the taxpayer is trying to shift the burden on the Revenue, but however, when a SCN is issued indicating investment/trading in shares, when the said allegation is not disputed by noticee, it is then for the noticee to discharge the burden by disproving the allegations levelled against it, with the help of supporting documents. Therefore, the arguments of the taxpayer not subscribed that the Revenue has not discharged the burden establishing the availing of credit on the common activities as alleged. The direction of the first appellate authority is set aside to the extent of imposing appropriate penalty - it is deemed appropriate to direct the Adjudicating Authority who shall carry out the directions of the first appellate authority insofar as differential demand along with consequential interest, if any, is concerned. Appeal disposed off.

Summary

Issues involved: Interpretation of Rule 6(3)(i) of CCR, 2004 regarding CENVAT credit on common input services used for both manufacturing and trading activities; Dispute over the trading activity of the appellant and the quantum of credit availed.

Summary:

Interpretation of Rule 6(3)(i) of CCR, 2004:
The Revenue contended that the appellant, engaged in manufacturing motor vehicle parts and trading investments, needed to maintain separate accounts for CENVAT credit on common input services. Failure to do so would violate Rule 6(3)(i) of CCR, 2004. The appellant argued they did not use common input services for output services, hence Rule 6(3)(i) was inapplicable. The burden is on the noticee to respond to statutory notices, with the onus shifting to the department once initial evidence is provided. The appellant's defense regarding investment in shares being related to manufacturing activity was noted, but the existence of trading activities was acknowledged. The original authority demanded credit on common input services for trading activity, which was later revised by the first appellate authority in line with the amended law under Notification No. 28/2018.

Dispute over trading activity and quantum of credit:
The trading activity by the appellant was disputed, with the burden of proof on the noticee to refute allegations. The first appellate authority's adoption of the amended law was deemed appropriate, and no penalty was imposed. The appeal was allowed in part, setting aside the penalty imposition and directing the Adjudicating Authority to handle the differential demand and interest payment. The appeal was disposed of accordingly on the specified terms.