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2018 (4) TMI 229 - AT - Service TaxCENVAT credit - trading activity - applicability of Rule 6 of CCR - it appeared that the appellant had utilized excess credit - Held that - since the trading activity is not an exempted service during the relevant period, rule 6 is applicable to the appellant - The Hon ble High Court of Madras in the case of Ruchika Global Interlinks has considered this issue and has held that trading activity was not amenable to service tax at the relevant period and therefore apportionment as provided in Rule 6(3) (c) of CENVAT Credit Rules, 2004 would get triggered and the High Court has dismissed the appeal of the assessee - demand of duty upheld. Demand of Interest and penalty - Held that - since the appellant had a bona fide belief that trading is an exempted service even prior to 01/04/201 1 and they had sufficient balance of CENVAT credit during the year 2008-09, they are not liable to pay interest - as far as penalty is concerned, there is no suppression on the part of the appellant and during the relevant time, there were conflicting decisions, penalty also set aside. Appeal allowed in part.
Issues:
Appeal against partial allowance of appeal by Commissioner (Appeals) regarding utilization of CENVAT credit for trading activity. Analysis: The appeal was against an order confirming demand for utilizing excess credit due to non-compliance with Rule 6(3). The appellant argued that Rule 6 did not apply as trading was not considered exempted service before April 2011, citing relevant case laws. They contended that the penalty under Section 78 was unwarranted due to conflicting decisions at the time. The appellant also claimed that interest was not applicable as they had sufficient CENVAT credit. The respondent defended the order, stating trading became an exempted service only from April 2011, supported by case laws. The Tribunal found that Rule 6 applied as trading was not taxable during the relevant period. Citing precedents, including the High Court's decision, it upheld the applicability of Rule 6. The Tribunal referenced a case where certain goods did not qualify for CENVAT credit due to not being manufactured as final products. Another case highlighted that trading activities were not considered services before April 2011. The Tribunal concluded that the impugned order was valid based on the above decisions. Regarding interest and penalty, the Tribunal ruled in favor of the appellant. Due to a genuine belief that trading was exempted before April 2011 and sufficient CENVAT credit balance, the Tribunal waived the interest payment. Citing a precedent, the Tribunal held that the appellant was not liable for penalty under Section 78. Consequently, the duty was confirmed, but interest and penalty were dropped, resulting in partial allowance of the appeal.
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