2012 (8) TMI 45 - AT - Service Tax

Cenvat credit Input service - input for manufacturing unit as well as for registered dealer for sale were brought in the same truck appellant taken cenvat credit of whole service tax paid Held that - Service Tax credit in respect of input service attributable to trading activities is not available.

Summary

Issues:
1. Eligibility of Service Tax credit for input services used in manufacturing and trading activities.

Analysis:
The appeal was filed by M/s Gulf Oil Corporation Ltd. against the order of the Commissioner (Appeals) regarding the eligibility of Service Tax credit for input services used in their manufacturing and trading activities. The appellant argued that since they were granted a single registration for Service Tax, all activities should be considered as manufacturing. They contended that the input service definition allows manufacturers to use input services for any purpose and that there was no provision for pro-rata calculation of Service Tax between manufactured goods and taxable services, especially in cases involving exempted goods or services.

The Commissioner (Appeals) found that the appellant had paid Service Tax on the freight charges for both manufacturing and trading activities but was not eligible for credit on the portion related to goods meant for trading purposes. The Commissioner held that the registered dealer engaged in trading activities was not entitled to avail the credit as they were neither manufacturers nor providers of taxable services.

The presiding judge agreed with the Commissioner's findings, citing the definition of input service under Rule 2(1) of CENVAT Credit Rules, which specifies that it is for use by a provider of taxable service or a manufacturer. The judge referenced a previous case, Orion Appliances Ltd Vs CST Ahmedabad, which determined that trading activities cannot be considered a service and, therefore, trading activities do not qualify for Service Tax credit. The judge upheld the Order-in-Appeal, concluding that the Service Tax credit for input services attributable to trading activities is not available to the appellant.

In conclusion, the judgment clarifies the eligibility criteria for Service Tax credit on input services used in manufacturing and trading activities. It emphasizes that trading activities do not fall under the definition of a service for the purpose of availing Service Tax credit, and therefore, such credits are not available for trading activities. The decision provides a clear interpretation of the law and sets a precedent for similar cases involving the apportionment of Service Tax credits in mixed manufacturing and trading scenarios.