2018 (3) TMI 1123 - AT - Central Excise

CENVAT credit - proportionate credit on account of appellant is engaged in trading activity - Held that - the appellant is nowhere engaged in the activity of trading. In fact the appellant is only a service provider as it has been held that appellant is a service provider. In that circumstances, when it has been held that appellant is not engaged any trading activity, the SCN was not required to be issued to the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
Proportionate Cenvat credit denial for trading activity.

Analysis:
The appellant, engaged in manufacturing and providing services of erection, commissioning, and installation of transmission tower line projects, faced denial of Cenvat credit due to alleged trading activity. The appellant procured materials from manufacturing units and the open market for these services. A show cause notice was issued invoking extended limitation for the period Jan. 2008 to March 2011. The denial of Cenvat credit was based on the perception that the appellant engaged in trading activities. The appellant contended that they were involved in turnkey projects, not trading, and thus no Cenvat credit reversal was necessary. Additionally, they argued that trading activities were exempted from service tax effective from 1.4.2011, a period post the notice issuance. The appellant sought to set aside the impugned order.

The appellate tribunal considered both parties' submissions and found that the appellant was indeed engaged in providing services of erection, commissioning, and installation on a turnkey basis, procuring materials for the same purpose. It was established that the appellant was a service provider and not involved in trading activities. Consequently, the show cause notice alleging trading activity was deemed unnecessary and set aside. The tribunal concluded that the appellant rightfully availed Cenvat credit for services used in providing erection, commissioning, and installation services. As a result, the impugned order was found to lack merit and was set aside. The appeal was allowed with any consequential relief.