2014 (12) TMI 364 - AT - Central Excise

Waiver of pre deposit - Cenvat Credit - Trading activity - credit availed on the retail agent s commission and other input services - Held that - Prima facie it appears that the adjudicating authority has committed an error while disallowing the retail agency commission which pertains to the manufactured products. Therefore, credit to the extent of ₹ 1.26 crore seems to be entitled to the appellant. Similarly, in respect of advertising agency service, storage and warehousing agency service and goods transportation by road, these services were also availed by the appellant in respect of manufactured goods inasmuch as the traded goods are supplied directly to the retail outlets by the concerned parties. Therefore, these services cannot be attributed to the trading activities. - Following decision of Mercedes Benz India Pvt. Ltd. vs. Commissioner of Central Excise, Pune I 2014 (4) TMI 12 - CESTAT MUMBAI - Partial stay granted.

Issues:
1. Computation error in confirming duty demand.
2. Eligibility of credit for specific services used in manufacturing.
3. Eligibility of credit for common services used for both manufacturing and trading activities.
4. Applicability of service tax credit on trading activities.
5. Pre-deposit requirement and waiver consideration.

Analysis:

Issue 1: Computation Error in Confirming Duty Demand
The appellant raised concerns regarding a computation error in the duty demand confirmed by the adjudicating authority. The appellant argued that a certain amount of credit had been denied twice erroneously. Specifically, the appellant highlighted that credit related to retail agent's commission for goods manufactured should not have been denied. The Tribunal acknowledged this error and found that the appellant was entitled to credit amounting to &8377; 1.26 crore for services directly linked to manufactured goods.

Issue 2: Eligibility of Credit for Specific Services Used in Manufacturing
The appellant had availed services such as advertising agency, goods transport agency, and storage and warehousing agency exclusively for manufactured goods. The Tribunal agreed with the appellant's contention that these services were not related to trading activities and thus, the appellant was eligible for credit amounting to approximately &8377; 90 lakhs for these specific services.

Issue 3: Eligibility of Credit for Common Services Used for Both Manufacturing and Trading Activities
Regarding common services like telephone, consultancy, and pest control, used for both manufactured and traded goods, the Tribunal noted that as trading was not considered a taxable service during the relevant period, any credit attributed to trading activities could not be allowed. Hence, the credit taken for common services amounting to &8377; 68 lakhs was not deemed eligible.

Issue 4: Applicability of Service Tax Credit on Trading Activities
The Revenue argued that trading activities were not taxable services during the period in question, and thus, no service tax credit should be allowed for services related to trading activities. The Tribunal upheld this argument, stating that any credit related to trading activities, whether exclusive or common, was not permissible.

Issue 5: Pre-Deposit Requirement and Waiver Consideration
The appellant offered to make a pre-deposit of &8377; 30 lakhs, which the Tribunal deemed satisfactory. The Tribunal directed the appellant to make this pre-deposit within four weeks, with the balance of dues waived upon compliance by a specified date. This decision was based on the appellant's offer and the Tribunal's assessment of the case.

In conclusion, the Tribunal addressed the computation error in confirming the duty demand, clarified the eligibility of credit for specific services used in manufacturing, distinguished between common services for manufacturing and trading activities, upheld the ineligibility of credit for trading activities, and considered the pre-deposit requirement and waiver in this case.

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