2013 (8) TMI 377 - AT - Service Tax

CENVAT credit - reversal of credit related to trading activity - Revenue was of the view that assesse had irregularly availed CENVAT credit given in respect of the exempted service held that - prima facie no serious infirmity in the process adopted by the adjudicating authority for arriving at the quantum of cenvat credit irregularly availed by the assesse which requires to be disallowed - Orion Appliances Ltd. vs. CST, Ahmedabad 2010 (5) TMI 85 - CESTAT, AHMEDABAD - it was quite clear that since trading activity was nothing but purchase and sales and was covered under state sales tax law, it may not be appropriate to call it a service. Therefore it had to be held that trading activity cannot be called a service and therefore it cannot be considered as an exempted service also adjudication order sets out the reasons for disregarding the assesse s assessment of the allocation of the cenvat credit availed between the taxable Business Auxiliary Service. - We prima facie find no serious infirmity in the process adopted by the adjudicating authority for arriving at the quantum of cenvat credit irregularly availed by the petitioner which requires to be disallowed. Extended Period of Limitation Waiver of Pre-deposit - Whether the extended period of limitation ought to be invoked Held that - The matter to be considered at the hearing of the appeal - We therefore consider it appropriate to grant waiver of pre-deposit and stay all further proceedings on condition that the assesse remitted the entirety of the cenvat credit disallowed, including the interest thereon (but excluding the component of penalty under Sections 77 and 78 and Rule 15(3) and 15(1) of the Cenvat credit Rules, 2004) stay granted.

Summary

Issues:
1. Waiver of pre-deposit and stay of recovery of proceedings sought by the appellant.
2. Allegations of irregular availment of cenvat credit in relation to trading activity.
3. Interpretation of Rule 2(e) of the Cenvat Credit Rules, 2004.
4. Disregard of certificate by the Commissioner in computing irregularly availed cenvat credit.
5. Invocation of the extended period of limitation.

Analysis:
1. The appellant sought waiver of pre-deposit and stay of recovery of proceedings following an adjudication order confirming the recovery of cenvat credit amounts and other penalties. The period under scrutiny was from 01.04.2008 to 31.03.2011, covered by two show cause notices. The appellant contended that cenvat credit on input services prior to 01.04.2011, related to trading activity, should not be disallowed based on the amended Rule 2(e) of the Cenvat Credit Rules, 2004. The Tribunal referenced conflicting views on whether trading activity falls under exempted services, ultimately emphasizing the clarification in the explanation to Rule 2(e) as a basis for considering trading activity as an exempted service.

2. The appellant argued that the Commissioner erred in disregarding a certificate from a Chartered Accountant that segregated cenvat credit between Business Auxiliary Service and trading activity. The Commissioner instead computed the irregularly availed cenvat credit based on standard accounting principles. The Tribunal found no serious flaw in the Commissioner's method for determining the disallowed cenvat credit, rejecting the appellant's contention regarding the allocation of credit between taxable and assumed exempted services.

3. The issue of invoking the extended period of limitation was left for consideration during the appeal hearing. The Tribunal granted waiver of pre-deposit and stay of further proceedings contingent upon the appellant remitting the disallowed cenvat credit amount and interest by a specified date. Failure to comply would result in the dissolution of the stay granted. The application was disposed of accordingly, setting conditions for compliance with the remittance requirements.

In conclusion, the judgment addressed the appellant's requests for waiver and stay, the interpretation of rules regarding cenvat credit in trading activities, the Commissioner's computation methods, and the potential invocation of the extended limitation period. The Tribunal provided detailed reasoning for its decisions and set clear conditions for compliance with the remittance obligations to maintain the stay of proceedings.