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2024 (8) TMI 995 - AT - Service TaxCENVAT Credit - input services - Trading activities - N/N. 03/2011-CE dated 01.03.2011 - Rule 6(3A) of the Cenvat Credit Rules, 2004 - period of dispute is from 01.04.2011 to 31.03.2012 - HELD THAT - In the present case the period of dispute is from 01.04.2011 to 31.03.2012 vide N/N. 03/2011-CE dated 01.03.2011, the definition of exempted service has been amended to cover trading activities. It is also that the appellant has accepted that they are required to reverse the cenvat credit on trading activities; as per the appellant the amount to be reversed comes to Rs. 2,00,455/-, whereas, as per the department, Cenvat credit required to be reversed as per the formula prescribed in rule 6(3A) amount to Rs. 2,70,184/-. On the basis of the formula as prescribed in Rule 6(3A) of the Cenvat Credit Rules the amount of proportionate credit to be reversed comes to Rs. 2,70,184/-. There are no infirmity in the amount of Cenvat credit to be reversed as held by both the authorities below after applying the formula given in Rule 6(3A) of Cenvat Credit Rules. It is found that Ahmedabad Bench of the CESTAt in the case of Orion Appliances Ltd. 2010 (5) TMI 85 - CESTAT, AHMEDABAD , it was held that ' Naturally this cannot be done in advance since it may not be possible to forecast what would be the quantum of trading activity and other activity which is liable to service tax. The only obvious solution which would be legally correct appears to be to ensure that once in a quarter or once in a six months, the quantum of input service tax credit attributed to trading activities according to standard accounting principles is deducted and the balance only availed for the purpose of payment of service tax of output service.' In view of the statutory provisions as prescribed in Rule 6(3A) of the Cenvat Credit Rules and the decision of the Orion Appliances Ltd., it is found that there is no infirmity in the impugned order - the appeal is dismissed.
Issues Involved:
1. Admissibility of Cenvat credit for input services used in trading activities. 2. Correct quantum of Cenvat credit to be reversed. 3. Applicability of penalties under Section 76 of the Finance Act and Rule 15 of the Cenvat Credit Rules. Issue-wise Detailed Analysis: 1. Admissibility of Cenvat Credit for Input Services Used in Trading Activities: The appellants were registered for payment of service tax under the categories of 'Authorized Service Station' and 'Business Auxiliary Service,' and availed Cenvat credit for various input services. During the period from 01.04.2011 to 01.03.2012, it was observed that the appellants availed input service credit of Rs. 10,56,464/-, with Rs. 62,775/- used exclusively for the service of vehicles and Rs. 9,93,689/- attributed to other services used for both vehicle sales and service station activities. The department alleged that the appellants availed credit for services utilized in both taxable services and non-taxable trading activities, which is not permissible. The appellants contended that only Rs. 2,00,455/- related to trading activities, as certified by a Chartered Accountant, and should be reversed. 2. Correct Quantum of Cenvat Credit to be Reversed: The adjudicating authority confirmed the demand of Rs. 2,70,184/- after applying the formula prescribed in Rule 6(3A) of the Cenvat Credit Rules, 2004. The appellants argued that the amount to be reversed should be Rs. 2,00,455/- based on the Chartered Accountant's certificate. However, the department maintained that the correct amount, calculated as per Rule 6(3A), was Rs. 2,70,184/-. The Tribunal upheld the department's calculation, finding no infirmity in the amount determined by applying the statutory formula. 3. Applicability of Penalties under Section 76 of the Finance Act and Rule 15 of the Cenvat Credit Rules: The adjudicating authority imposed a penalty of Rs. 2,70,184/- equivalent to the confirmed demand under Rule 15 of the Cenvat Credit Rules and an additional penalty under Section 76 of the Finance Act. The appellants argued that they should not be liable for penalties as there was no intention to evade tax. The Tribunal, however, found that the show cause notice was issued within the normal period of limitation, and the penalties were justified as per the provisions of the law. Conclusion: The Tribunal dismissed the appeal, upholding the impugned order. It found that the appellants were required to reverse the Cenvat credit on trading activities as per the formula prescribed in Rule 6(3A) of the Cenvat Credit Rules, amounting to Rs. 2,70,184/-. The Tribunal also upheld the penalties imposed under Section 76 of the Finance Act and Rule 15 of the Cenvat Credit Rules, finding no infirmity in the adjudicating authority's order. Order Pronouncement: The order was pronounced in the open court on 20.08.2024.
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