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2016 (10) TMI 40 - AT - Service TaxWhether, during the period 2005-2006 to 2009-2010, trading should be considered as exempted service under Rule 2(e) of the Cenvat Credit Rules, 2004 for the purpose of requirement of Rule 6(3) ibid - Held that - on perusal of both un-amended and amended provisions of exempted service, it reveals that the activity of trading was not included within the ambit of definition prior to 01.04.2011. In this case, since the dispute is up to the period of 2009-2010, the amended definition of exempted service would not be applicable. Thus, the embargo credit in Rule 6(3) of the Rules does not have any application for taking of cenvat credit on the activities concerning provision of taxable service and trading activity. Hence, denial of cenvat credit by the authorities below, in my opinion, is not in conformity with the statutory mandates. - Decided in favour of appellant
Issues involved: Determination of whether trading should be considered as exempted service under Rule 2(e) of the Cenvat Credit Rules, 2004 for the purpose of Rule 6(3).
Analysis: 1. Issue of Exempted Service Definition: The issue at hand revolves around the definition of exempted services under Rule 2(e) of the Cenvat Credit Rules, 2004. The definition includes taxable services exempted from the whole of the service tax leviable thereon, incorporating services not subject to service tax under Section 66 of the Finance Act. An important aspect is the amendment to the definition through notification no. 3/2011-CE(N.T.) dated 01.03.2011, which explicitly added trading within the scope of exempted services. However, the judgment highlights that this amendment is not applicable to the period in question, which is up to 2009-2010. Therefore, the trading activity cannot be considered as an exempted service during this timeframe. 2. Rule 6(3) Application: The judgment delves into the application of Rule 6(3) of the Cenvat Credit Rules, 2004 concerning the denial of cenvat credit by the authorities based on the contention that trading should be treated as an exempted service. The Tribunal's analysis emphasizes that since the definition of exempted service did not explicitly include trading before 01.04.2011 for the relevant period, the provisions of Rule 6(3) do not restrict the availment of cenvat credit for activities related to both taxable services and trading. Consequently, the denial of cenvat credit by the lower authorities is deemed inconsistent with the statutory provisions, leading to the Tribunal's decision to allow the appeal in favor of the appellant. 3. Adjudication and Impugned Order: The judgment outlines the background of the case, where the Department disallowed cenvat credit under Rule 14 of the Rules due to the perceived exempted nature of trading activities. The adjudication order confirmed this disallowance, resulting in the impugned order dated 16.04.2013. The Tribunal's scrutiny of the case reveals that the appellant utilized common input services for both taxable services and trading activities. Given the absence of trading within the definition of exempted services for the relevant period, the requirement to maintain separate accounts or pay additional amounts under Rule 6(3)(A) does not apply. Consequently, the impugned order is deemed without merit, leading to the Tribunal's decision to allow the appeal in favor of the appellant. In conclusion, the judgment clarifies the interpretation of exempted services, the application of Rule 6(3), and the implications for cenvat credit concerning trading activities, ultimately resulting in a favorable outcome for the appellant based on the statutory provisions and historical context of the case.
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