2016 (9) TMI 46 - HC - Service Tax

Whether on the facts and circumstances in calculating amount of the eligible Cenvat Credit of service tax paid on common input services margin / value addition on trading of goods is to be considered and not entire sale price / turnover of traded goods - findings of the Tribunal relating are purely and solely based on its decision in Mercedes Benz India Private Limited Vs. The Commissioner of Central Excise Pune-1 2014 (4) TMI 12 - CESTAT MUMBAI while dealing with Rule 6(5) of Cenvat Credit Rules 2004. Held that - it may be stated that this Court has dealt with the order passed by the Tribunal in the Appeal of Mercedes Benz India Private Limited at length and coming to the conclusion that findings recorded in the said decision on this question of law cannot be sustained. Thus keeping open contentions of both the sides this Court allowed the Appeal filed by Assessee - Mercedes Benz India Private Limited set aside the findings of the Tribunal and remanded the matter back to the Tribunal for fresh finding on this question of law and on the other remaining questions of law raised therein as they were arising out of the finding to this question of law. In the instant case as the other questions of law are incidental and arising out of the finding to above question and as the finding to above question being based on the decision of the Tribunal in Mercedes Benz India Private Limited and the questions of law raised for consideration in the decision of Mercedes Benz India Private Limited (Supra) being remitted back it becomes necessary to remit the questions of law raised in the present Appeals also to the Tribunal for its fresh decision. Therefore keeping open contentions of both the sides we allow these two Appeals by setting aside the impugned order of the Tribunal to the extent that the same fails to deal with above question raised. The remaining questions in the said Appeal except those which are not pressed being incidental and arising out of above question they are also remitted back for the Tribunal to answer them as well. - Matter remitted back

Summary

Issues Involved:
Challenging the Final Order passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench, Mumbai in two Appeals under Section 35G of the Central Excise Act, 1944, r/w. Section 83 of the Finance Act, 1994.

Detailed Analysis:

1. Substantial Questions of Law in Central Excise Appeal No.187 of 2015:
The Appellant raised various substantial questions of law regarding the availability of credit of service tax paid on common input services used in manufacturing and trading activities, the correctness of the demand raised without a mechanism for calculating proportionate service tax credit, and the extension of full Cenvat Credit for services directly used for manufacturing activity. The Appellant also questioned the calculation of eligible Cenvat Credit on trading activities and the application of the formula for reversal of Cenvat Credit for the period before 01.04.2011. The Tribunal's reliance on a previous decision without considering the present case's facts and the violation of principles of natural justice were also raised.

2. Substantial Question of Law in Central Excise Appeal No.192 of 2015:
The Appellant questioned the Tribunal's justification in upholding the penalty under Rule 15A of the Cenvat Credit Rules, 2004.

Analysis of the Judgment:
The Appellant's counsel submitted that certain questions were not pressed, while others were not adequately addressed by the Tribunal, necessitating a remand for a fresh decision. Particularly, the Tribunal's reliance on its decision in a previous case involving Mercedes Benz India Private Limited was highlighted, with the Appellant arguing that the findings were inaccurately applied to the present case. The Court had previously set aside the Tribunal's findings in the Mercedes Benz case, leading to a similar remand request in the current Appeals.

The Court acknowledged the interdependence of the questions raised in the Appeals and remanded them back to the Tribunal for fresh consideration. The Tribunal's failure to address question (f) in Appeal No.187 of 2015 adequately led to the setting aside of the impugned order. The remaining questions, except those not pressed, were also remitted back for the Tribunal's review. In consequence, Question (a) in Appeal No.192 of 2015 was also remanded for a fresh decision.

Therefore, the Appeals were allowed, and the matter was remitted back to the Tribunal for a comprehensive reconsideration of the substantial questions of law raised by the Appellant, ensuring a just and accurate determination in light of the specific circumstances of the case.