2014 (1) TMI 1164 - AT - Central Excise

Denial of Credit on input services related to trading activity as well as research and development centre - Waiver of Pre-deposit Held that - As per the provisions of Rule 6 of the Cenvat Credit Rules whereby the value in case of trading is different between sale price and the cost of goods sold or 10% of the value goods sold, whichever is more, has to be taken into consideration - the total sale value of the traded goods has been taken into consideration while confirming the demand and these figures have been taken from the balance sheet - the offer made by the applicant is sufficient for hearing of the appeal thus, the applicants are directed to deposit Rupees fifty lakhs as pre-deposit upon such submission rest of the duty to be stayed till the disposal Partial stay granted.

Summary

Issues:
Delay in filing appeal, waiver of pre-deposit of duty, denial of credit for input services related to trading activity and research and development center, interpretation of Rule 6 of the Cenvat Credit Rules regarding trading activity as a service.

Delay in filing appeal:
The applicant sought condonation of delay in filing a supplementary appeal due to an objection raised by the Registry. The main appeal was filed within the normal period of limitation, and thus, the delay in filing the supplementary appeal was condoned.

Waiver of pre-deposit of duty:
The applicant requested waiver of pre-deposit of duty, interest, and penalty amounting to Rs.8,45,56,461. The demand was confirmed after denying credit for input services related to trading activity and research and development center. The Tribunal had previously waived pre-deposit of dues related to input services for the research and development center.

Denial of credit for input services:
Regarding the denial of credit for input services in trading activity, the applicant argued that the adjudicating authority did not consider the provisions of Rule 6 of the Cenvat Credit Rules. They contended that the value for trading activity should be calculated based on the sale price and cost of goods sold or 10% of the cost of goods sold, whichever is more. The applicant claimed that the total value of traded goods was taken from the balance sheet, not in accordance with Rule 6.

Interpretation of Rule 6 of the Cenvat Credit Rules:
The Revenue argued that trading activity is not a service based on previous Tribunal decisions. However, the applicant cited Rule 2 of the Cenvat Credit Rules, which clarifies that exempted services include trading. They also referenced a circular stating that exempted services encompass trading services. The applicant agreed to reverse credit of approximately Rs.45 lakhs but offered to deposit Rs.50 lakhs for the appeal hearing.

Judgment:
The Tribunal considered the provisions of Rule 6 of the Cenvat Credit Rules, which specify the method for calculating value in trading activities. They found that the total sale value of traded goods was considered while confirming the demand, contrary to the applicant's argument. The Tribunal deemed the applicant's offer of depositing Rs.50 lakhs sufficient for the appeal hearing. They directed the applicant to deposit the amount within eight weeks, after which the pre-deposit of remaining dues would be waived, and recovery stayed during the appeal's pendency. The appeals were scheduled for hearing upon compliance by a specified date.